CIHM 
Microfiche 

Series 
(Monographs) 


ICMH 

Collection  de 
microfiches 
(monographies) 


CanadLin  Institute  for  Historical  Microreproductons  /  Institut  canadien  de  microroproductions  historMos 


r^-iQ99 


Technical  e.f 


\t' 


J.""'  c  Notes  /  Notes  techniques  et  bibliographiques 


The  Institu'e  has  at't.n—-  d  f  ji..ain  the  best  original 
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n 

D 

D 
D 

n 


D 


D 


Coloured  covers  / 
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Covers  damaged  / 
Couverture  endommagee 

Covers  restored  and/or  laminated  / 
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Cover  ti'  J  missing  /  Le  titre  de  couverture  m.anque 

Coloured  maps  /  Cartes  geographiques  en  couleur 

Coloured  ink  (i.e.  other  than  blue  or  blacK)  / 
Encre  de  couleur  (i.e.  autre  que  bleue  ou  ncre) 

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□ 


Pages  damaged  /  Pages  endommagees 

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Pages  restaurees  el'ou  pelliculees 


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Pages  detached  /  Pages  detachees 

/]    Showlhrough /Transparence 

I      I    Quality  of  print  varies  / 


D 
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Qualite  inegale  de  I'lmpression 

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Comprend  du  materiel  suppiementaire 

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10x 


14x 


18x 


22x 


26x 


30x 


iJ 


12x 


16x 


20x 


24x 


28x 


The  copy  filmed  hero  has  been  reproduced  thanks 
to  the  genefcsity  of: 


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g^n^rositd  de: 


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Bibliotheque  nationale  dj  Canada 


The  images  appearing  here  are  the  best  quality 
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Les  images  suivantes  ont  ili  reproduites  avec  le 
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conformity  avec  les  conditions  du  contrat  de 
filmage. 

Les  exemplaires  originaux  dont  la  couverture  en 
pspier  es:  imprim6e  sont  film^s  en  commencant 
par  le  premier  plat  et  en  terminant  soit  par  la 
derniAre  page  qui  comporte  une  empreinte 
d'impression  ou  d'illustration.  soit  par  le  second 
plat,  selon  le  cas.  Tous  les  autres  exemplaires 
originaux  sont  filmis  en  commenqant  par  la 
premiire  page  qui  comporte  una  empreinte 
d'impression  ou  d'illustration  et  en  terminant  par 
la  derniire  page  qui  comporte  une  telle 
empreinte. 


The  last  recorded  frame  on  each  microfiche 
shall  contain  the  symbol       »    (meaning  "CON- 
TINUED"), or  the  symbol  V  Imeaning  "END"), 
whichever  applies. 


Un  des  symboles  suivants  apparaitra  sur  la 
derniire  image  de  cheque  microfiche,  selon  le 
cas:  le  symbole  —^'  signifie  "A  SUIVRE",  !e 
symbolo  V  signifie    "FIN". 


.Maps,  plates,  charts,  etc.,  may  be  filmed  at 
different  redur^ion  raiios.  Those  too  large  to  be 
entirely  included  in  one  exposure  are  filmed 
beginning  in  the  upper  left  hand  corner,  left  to 
right  and  top  to  bottom,  as  many  frames  bs 
required.  The  following  diagrams  illustrate  the 
method: 


Les  cartes,  planches,  tableaux,  etc..  peuvent  etre 
filmis  d  des  taux  de  reduction  diff^renis. 
Lorsque  le  document  est  trop  grand  pour  etre 
reproduit  en  un  seul  cliche,  il  est  film6  i  partir 
de  Tangle  supirieur  gauche,  de  gauche  i  droite. 
et  de  haut  en  bas.  en  prenant  le  nombre 
d'images  nicessaire.  Les  diagrammes  suivants 
illustrent  la  rn^thode. 


1 

2 

3 

1 

2 

3 

4 

5 

6 

M 

ICROCOPY    RESOLUTION    TEST 

ANSI  and  ISO  TEST  CHART  No 

1.0       «a 

CHART 

2 

2.5 

nil  9  9 

l.l 

i-    ..c         2.0 

III 

1.8 

1.25 

III 

1.4 

1.6 

A     -^P 

=^1 

_IEn  HVMGE     Inc 



-  5989  -  fo. 

INDUSTRIAL  COMBIXATIOXS  AND  TRUSTS 


^h^y^^' 


THE  MACMILLAN  COMPANY 

NEW  VOKK    ■    IIOSTON    ■    CHICAGO 
DALLAS    •    SAN    FKANCISCO 

MACMII.I-AN  &  CO.,  Limited 

LONDON    ■    IIOMHAY   ■    CALCL'TTA 
MLMIOI'KNE 

THK  MACMIl.I.AN  H)    OF  CANADA,   Ltd. 

7C  KONTO 


INDUSTRIAL 
COMBINATIONS  AND  TRUSTS 


f.DlTKl)   HV 

WILLIAM  S.  STEVENS,    Pn.  D. 
Columbia    University 


^5 

■a 


THE  MACMILLAN   COMPANY 

All  rigkls  rtMTwti 


^. 


171239 


„  TIIE  MACMILLAN  COMPANY 


VublUhfl  J^njjrv,  igM- 


T^^^OK  T.    MO^   »   ""^ 
(IREENFIELD.  MA»*^^   "^  .^^- 


TO  PROFESSORS  PATrriN,  McCREA, 
MEADE  AND  JOHNSON  OF  IlIK 
WHARTON  SCHOOL,  UNIVKKSITY 
OF  PENNSYLVANIA,  THE  EmTOBL 
DEDICATES  THIS  VOLUME  OF 
READINCiS,  IX  CRATEFUL  RF.MEM- 
BRAN(  E  OF  SVMPA'niY,  <X)L'N- 
SEL    AM)  ENCOURAGEMENT. 


PREFACE 

During  the  la.-^t  two  or  three  years  while  the  editor  of  thi-,  volume 
was  fjiviniJ!  careful  .>tu<ly  to  the  suliject  of  Trusts,  he  became  more 
and  more  forcibly  impressed  by  the  need  of  a  presentation  of  the 
subject  that  should  be  strictly  im[)artial,  that  shoulf!  advocate  no 
theories,  but  yet  should  present  the  problems  that  arise  in  relation  to 
Trusts  comprehensively,  and  as  they  arc.  The  realization  of  this 
need  was  increased  by  the  fact  that  a  larj;e  number  of  writers  have 
shown  the  disjxjsition  to  confuse  the  pro!)lems  to  which  the  Trust 
j^'ives  rise,  with  those  that  develon  in  connection  with  corporations 
and  large  scale  production. 

The  publication  of  the  S.  el  and  Interstate  Commerce  Com- 
mittee Investigations  bridged  many  of  the  chasms  which,  in  the 
opinion  of  the  editor  lay  in  the  way  of  a  satisfactory  treatment  of 
the  sul:>ject  from  source  material.  Thereupon  it  was  decided  to 
altem[)t  the  present  volume,  a  book  that  should  not  give  the  reader 
a  second  hand  knowledge  of  the  Trusts,  but  which  should  place  be- 
fore him  the  original  documents  themsel  es:  pooling.  Trust,  factors 
and  international  agreements;  court  decisions  and  laws  against 
Trusts;  Trust  methods  of  fixing  prices,  eliminating  competition  and 
restraining  trade;  the  dissolution  plans  of  dissolved  Trusts;  lease  and 
Hcense  agreements  of  representative  patent  monopolies;  and  thj 
views  of  eminent  business  and  {irofes.-ioiial  men  as  to  the  proper 
methods  of  handling  this  gigantic  problem. 

Throughout  the  preparation  of  the  \x)lume  two  purposes  were 
held  steadily  in  mind.  The  first  was  to  desi.rn  a  volume  that  should 
place  within  the  reach  of  the  students  in  courses  in  Trusts  in  our 
colleges  and  universities,  material  of  which  much  is,  as  the  editor 
knows  from  personal  experience,  only  too  often  difficult  of  acce>.^ 
or  else  altogether  unavailable.  The  second  purpose  of  the  editor 
was  the  collection  of  such  a  set  of  materials  as  would  afford  the 
ordinary  reader  who  chances  to  be  interested  in  Trusts,  a  fair 
knowledge  at  first  hand  of  the  historical  development  of  the  Trust 
movement  in  the  United  States,  and  a  thorough  comprehension  of 
those  problems  in  regard  to  them  that  the  country  is  facing  to-dav. 


Preface 

vm 

with  the  idea,  that,  .hould  us.      a^^o^^^^^^^^  ^^^^^^^  f^^„,  ,he 

it  is  desij:ne<l,  it  may  be  P' :■''':,,"'     ^tinK  upon  the  sub  ect. 

n,ass  of  nmterial  that  is  ^^^f^'^^f  XtKm '"^s  tu  1  )r.  McCrea 
The  editor  ^vi^hes  to  niake  h  -leknoNN^^^^.^^^^^^^^.^^^  ^^^^  ^.^^j^^^^,^ 

,,(  the  Wharlor.  school,  Ln^   r.  k>  -^^^  ^^^^^^  ^^^  ^^^  Le^vlS 

susRestionsaiKlcriticisnYinrcRanlton  ^^^^^^^  ^^^^^^  .^  ^, 

Abln.tt.  a  graduate  ^J^^^;;"    !"  \t   n  a  uscript  proof.     GrateUil 
junetion   with   the  ed'.tn.    r  ad     ht  ma  ^i.^^i  ^^^  ^^^  ^^.^^^^^. 

LknoNvledgment.  are  abo  u       U    ^^^  •     ;.  ■>     j  ^.^f^iCng  kindness 

ment  of  Justiee  for  ^'^  1'^""'^^  mVl  rcnlvin"  to  numerous  re- 
Z  suppl>i..  required  docu^en^jdrplj^^^  ^^  ^ 

quests  for  "''^'""-'''"rl,^uld  Representative  Stanley,  each  of 

„i,vhieh  they  were,  re.peetivdv.r.^.  iar,_u 

WlbblAM  ■^.  STEVENS. 


Unity,  Maine. 
September,   lyii. 


CONTEXTS 


CHAPTKR  I 

SPECIilENS  OK    EaKLV    PiiOLING 


Afire 
1  \muiT 


PAGE 
I 


,  \rtidcs  „{  Association  of  iIk-  Nhmufa.  turcrs  .,f  (.unpowdiT  .  _.  .  ... 
V.  I'n 'm-.linps  of  Uu-  Kentucky  Di.^tiUcr.  at  ihor  Meeting  in  Lou.svtUe 
5.  Afirccmcnl  of  Knvflopc  Manufacturers     


2 
4 

10 


CHAPTFR  n 

Rl.I'Kl  -1  MXTIVI,    'llU-STS 


Note  . 
!  xmuiT 


I    Stanikircl  (hlTrusl  Airrcciiu  lit  .il  1^70  .  .  -    _ 

[■  Stamiar.l  Oii  Trust  .X^rccnunt  and  Suiiplcmcntal  Iru-t  .\Krccmcnt 


of  iSSj  

1,    Deed,  Tlie  Suffir  Relineries  (  o 

4    Distillers' and  Cattle  Feeders'    Irusl. 


J3 
14 

-7 
30 


CHAI'TI.K  111 

l.Kc.isL.NTivi.  OrrcisrnoN  to  riic  TRfST 


'Sole  . 


LXHiniT 

1.  The  Shernum  Anti-trust  Law 

2.  Kansas.  .  . 
^.  Keiitiuky 

4.  Mil  hitraii.  . 

5.  Norlh  CaroliiM 


43 

43 
45 
46 
48 
50 


C  H  KlM  1  K   1\ 
Jnii,  i\i.  Aii\(  K  ON  Till.  Tri-st 


yotr 


,     ^tate  e\  rel.  Attornev  \ .  Standard  ( »il  C  omiMi.v 

2    States  V.  Nebraska  DiMiUinK  Company 

y   IVople  V.  North  Kiver  >u^!ar  Reimim'.  (V.mpanv 

i.< 


5» 

5» 

57 
61 


Comi:nts 


CIIAITKR  V 

Till     IIol.DlNC    ("OMPAN-Y 


\nt.' 


PAGE 

.      '>7 


Group  I .  Power  of  One  Corporation  to  Hold  Stock  in  Another 

i.xiiuur  .     . 

I.   Di-  l.a  \crsne  kciri};cr:Uin^'  M;uhiiu-  Ciinipany  v.  (uTiii.in  ^avinj: 
In^titutiim.     . 
Group  2.  Difference  between  the  Trust  and  the  Holding  Company 

l.XHII'.IT 

1.  S'.inil.ird  Oil  chun^'o--  from  a  Tru-^l  to  a  Hnl.lin^  (  nnipany. 
Groups    Holding  Company  Laws 
i.xiiiinr 

1.  State  of  Ni-\v  Jt-r-e\ 

2.  State  of  New  Vork 

3.  State  of  Delaware  ...  

4.  State  of  Maine  


'•7 


7,? 
/» 

78 

7Q 
"'» 
79 


cii.xrTi.u  M 

roKMNTI'JN    uF  TIi;     I'mTI.O   STATES   StKI.L   CuRPt 'KATION 

Xoir  .  . 
EXHIBIT 

1.  Testimony  of  John  \\    (iatt^.  . 

2.  Testimony  of  i;ilKrt  11.  (iary  .  . 

3.  Testimony  of  ('has.  M.  S<  hwah    .  .  

4.  Testir.-.ony  of  Andrew  Carnei^ie.  


81 
8i 


CIIAl'Tl.R  VII 
I' \i  T();(-;'  .\.  Rr.rMi.NTS 

EXIIMUT 

1.  Table  and  Stair  Oil  Cloth  As.<ociation 

2.  .\meriian  Tohacio  Company.  . 

3.  National  Wall  PaiKT  Company.  . 

4.  American  Su^ar  Ki  lining  Company 

5.  I'niled  State-.  Kiililiir  l"ompany. 

(>.  Standard  Sanitary  Manuf.u  luring  Company  . 

7.  Kxccrpt'^  showing  the  Operation  of  the  Factor's  Ai'retiiu 

American  Tobacco  (  ompany  . 

8.  Dr.  Miles'  Medical  Company  \.  John  1'    lark  &  Sons  Co 


111     ol     till' 


iiS 

iiH 
'-'7 
130 

133 

i,?8 

140 


I 


Contents 


zi 


CHAPTER  VIII 

lNTr-{NATl!)N-\r,   .\r,i(i;r.MF.NTS 


Xole 


LXHIHIT 

1.  AKrccmont  of  tb"  Amcriran  Tohacco  Interests  and  the  Imperial  To- 

haec  <j  '  ompany,  I.imiteii,  relative  to  the  Limitation  of  the  Sphere 
of  <)|)eralion  of  eai  h,  and  the  Transfer  of  O^den's  Limited  ... 

2.  A:.;reenu>nt  made  l)et\vei'n  the  .Xnierit  an  Tohac  eo  Company  Interests 

and   the   Imperial  Tohaico  Comfiany,  Limited,   relatne  to  the 
I  ontrol  of  Inline--,  hy  the  IJriti^h  .\meriean  I'ohacco  Co.,  Limited. 

3.  International  .Xureenieiit  in  the  i:vp|o-,i\  es  Trade 

4.  Aluminum  Compaii>-  of  .\nierii  a 


PAGK 
1 60 


161 


lOS 
I/-f) 

'33 


A,..',- 

EXHiniT 

I. 


CIIAI'TLR  IX 
Pools  wd  .\.ssoci  vtiok?; 


13. 


Steel  Kail  Pool 

Constitution  and  l{y-!:iw?  of  the  Midiigan  Retail  L;imlxr  Dealers 

Association  . 

Fundamental  .\,!,'recmcnt  of  tlie  Explosive  Trade 

Addyston  Pipe  Pools.  . ..  .[ 

Kxlratls    from     the    Constitution   and    By-Laws   of   the   Coal 

Dealers'  .Association  of  California 

Structural  Sierl  .\-.sociation  of  the  United  Slates   

The  Steel  Plate  A-sociation 

By  Laws  of  the  Kavtern  States  Retail  Lumber  Dealers  Association 

Naval  Stores  .\f;rcenient 

Hath   Tuh  Coinhination 

U.ith  Tul)  Comhination      . 

Memorandum  <.f   Ai;reement    (c.dled   the   Kastward   .\^reenient) 

rei;ardin),'  the  Trade  between  the  Atlantic  Ports  of  the  U.S.A. 

and  the  Eastern  .\siatic  Ports  .  . 


uS; 


188 
'95 

J09 
211 
"9 

-.<7 
^40 


■44 


(TIAPTr.R  X 
Tin;  Pvii.M   Mo.sopoLY 

lA'IIIlUT 

1.  I.r.i-e    .iml    License    .VRrcement   of    the  United   Shoe   Machinerv 

Company  for  lertain  Mat  hines '    ^.^ 


-'):■« 


.\  LxcluuiKc    Liiense    .Vi;reemenl   of   the    Motion    Picture    Patent-. 

Company 
3.  Crown  i'ork  and  ~>eal  (  mtipanv  . 
4    Svdnev  Hetiry  v    A    !i    1  h.  k  C.mpany. 


3^^ 
.'6') 


Xll 


CuNTENTS 


Cll.W'Tl.K  XI 

..-,■  Pom    iROS  \vn  Rmlkou)  Compavv 
Thk  Abm^kption  n,  THK  Tennks.i-l  Com,.  Iron  _,^,.^^. 


Sole 

EXHIBIT 


,NurraUvcoi  Judge  Klbcrl  H.Gary 


;»5 
285 


CIlM'T!  K  Xn 

MtTUODi   OF   C\)Mn.TIT10N    AN 


u  Rl-traim'  ni   Tkadk. 


A'oic  

Group  I 

txir.iui 

Coirp.my  . 

'^' Compi^ny 

V  General  IClcdric  Conii>atiy. 

•'■ CoiniKiny 

4- 
Group  2  • 

EXHllilT 

J    . Compan)  .. 

C'omP'ify 


'•  77  d7r.m.  .Ic  N'.mour.  1'..w.Ut  Company 

t.lnu.rn.a,.,n..lll:>rv.M.r  Company    


_ —  Companx- 

C'DHipany 


Group  3 

K.XHIISIT 

I. 

Group  4 

IXIlIllIT  , 

1    Kxplosivos  Iradc 

.    Standard  Oil  C.mipanv 


.V 


(.'.iiiipanv. 


Groups 

fcXllIBIT  . 

V7;;;,^T::i.^:ron  Trade  KelaUon.-- 

,    _^^S-rntof,hc  — Associati^m. 
4.  Rc,x)rt  ..(  Trade  K.laiion  CommUlce   . 
Group  6 

,     Customer-  Lists  of  the ■'^>^' 

...  Circulation  of  Information  ... 


322 
312 

315 
3><' 
3' 8 
3'8 

318 
31Q 
3-6 
3 -'7 
3iQ 
3-Q 

3-^9 
33« 
333 

333 
335 
330 
.•;4i 


Dealer- 


34" 

S4'> 
V-,S 

34Q 


Contents 


xm 


,V  "Yes"  and  "Xo"  Lists  of  the 

4.  C'ircular  issued  !)>• 

,.  Otiicial  Re|H)rt  of  the — 

Ntw  York,  \.  Y 


Dealers"  Assorialion 

Dealers'  Association  to  the  Trade 
Dealers'  Association  — 


35-' 
353 


h. 


Ass<iciation 


,353 
354 
3SS 


Group  7 

lixiimiT 

1 .  Trade    .  .  . 

2.  Explosives  Traue 
3- Company 357 

Group  8    365 

EMIIIUT 

1. Comjiany 

C'ompan 


355 
3S6 


36s 
367 


Group  9     368 

KXiiir.ir 


CompdHN 


368 


Company 371 

( 'onsolidation  Coal  Company 373 

American  Su;;ar  Kelining  Comiian}' 377 

( lary  Dinner^  .  386 

01  America 404 


CHAl'i;.!-:   XIll 

RlXtNT   TrUsI'    Dl.Cl.-UJNS 

Note 407 

EXIUnlT 

1.  Decree  aiiainst  the  Standard  Oil  C(imj).in\- 407 

2.  De(  ree  a^'ainst  the  American  Toixuiv)  Company. 41(1 

j.   Decree  aj^nins'i  the  I'owder  Comnination.  4:4 

4.  Decree  against  the  Standard  Sanitar\'  .Manufactur'iiK  Co \2() 

5.  Decree  of  Injunc  lion  ai'ainsl  the  Southern  Wholesale  (irocers'  Asso- 

ciation. .  433 

0.   Decree  against  the  tieneral  Wet  trie  Compan.N,  430 


CHAT  Ilk   \I\ 
Mf.thods  of  Dissoi.t  tion 


A'<'/<- .  .  

EMiiiur 

1.  The  Dissolution  of  the  American   Tc 

2.  The  Dissolution  of  the  Standard  Oil 
3-  Dissolution  of  the  Powder  Trust 


liacco  Company 
( 'ntiiiianv  .  .  . 


440 

440 

46i 

463 


sv 


Contents 


LUAPri.K  XV 
ErncACV  or  Ui^^olutton 


PAGE 

■    4/2 


Note  . 

EXIllEIT 


I .  Results  of  the  Tobacco 


Di^^oluliun  plan  us  chimed  by  the  Teti- 


47-! 


474 


>'"'"-■'*  •  .      ■  •  ■  ■     T  \v,,-, ,,  ComiKiiiv   with   respect    to   the 

'■  "iSit.;s  ,Sa™  mS-'i  ^- 1 ' ^•^■'-  "'■  ^""■"' 

A„KTl,an  T..la.m  C'»>1'"?;.  „;■   .|; „:,,,,  t.^kkt..  will,  l.-u- 

Company •, , 479 

,.  Claim  of  the  ;\tt"rrFy  .^''^^^^/.^  'l  .af  Tobacco' Association    etc., 

'    ^"^rlr^iat/of  ^iriulo;;:  ■!;.      ..y  tl.  American   Tobacco  ^^^ 

Company  and   <  >ilicTs  . • ^yg 

-.  Arfiumcnt  of  I'clix  H.  U'vy  ■_     ■  ■■  •  •  •  •  .'    jj'^.  Distribution  of  To- 

'''^"  •  ,„i.  Amendca  Return  to  tUc  AUcrnative  WrU  of  Manda-   ^_^ 
CIIAl'Ii-K  XVi 


Q.  Res\H)ii( 
nius. 


PROrOSEU   Ml.TUODS  OS-    Dr-AUNC.    wi 


Till.   Twr-^T    rROIlLKU 


^'i>t 

EXUIHIT 


"'    '  .Til     "^    .'l 

,  pre.i.l.nl  William  Howard  ia.l. 

2  Senator  Koberl  W.  l^yf^^'^-  ■ 

,  Senator  John  Shari)\\iii'--i- 

A  Senator  AUnrt  li.  Cummins. 


}.  Jud-eKlberl  11.  C.ary. 
(,    Andrew  Carnc'^ie 

7.  James  A.  rarrell. 

8.  C.corKcNV.  IVrkins. 

9.  Louis  U.  Urandei.. . 


5^5 

530 

537 
.S40 
54S 
557 
559 
5f>3 
574 


IMrORIANT 

THK  editor  desires  to  call  atten.u.u  -;^^'^f;;^S'^.^.  in  the 
.    The  editor  is  ^--^.r:f:^:^,^^^X^oL.i\^^^lo^.n^s 

volume.    So  fur  as  P."^f,  '^      .^.^  i"" rS  editor  believes  that  all  the  errors 
oKictlv  as  thev  were  m  the  on;  inai.     i  ^.^  y^,^^.^  .jy,,,,  the 

errors  in  the  onguials.  necessarily  taken  from  advance 

'■■  '^"v'  i:^tir;h  -u'- ---i^'  ^^  ''^^•>'  ^^^^'^  "^"  "^'"^  ^^"'- 

copies  as  at  tnc  unit  uil 

ma"'ny  places  in  Chapter  Xll.  ^,  ^  ^h^w  iha 

T  I-  xamination  of  the  document  '^'f  ""f^f  '  or's  ireement.     As 
it  resembles  bo,h  a  ^^i^!^^XZ^l:^\: '^^l.uX.a  .  factor  of  tV 
single  contract  '''^P^i;-'>,"''''\;'if    Several  of  such  contracts   hov 

p,„lii,gaT,.lasalKlor-=a6wma>l. 


INDUSTRIAL    COMBINATIONS 
AND  TRUSTS 


•ork  in  the 
(locumcnls 
II  the  errors 
I'  (lone  the 
larenthcscs, 
Such  errors 
ouad  to  he 

)m  luiviuice 
t  tieeii  pub- 
Committee 
the  last, 
s  in  original, 

of  names  in 

ill  show  that 
•laent.  As  a 
factor  of  the 
itract^.  how- 
uad  both  as  a 


CH AI'TKR   I 

S}'i;ci.Mi;.\.s  OF  i-arlv  I'oolixg 

NOTE 

The  industrial  combinatii)n  and  trust  movement  as  a  feature  of 
our  national  life  may  be  said  to  date  from  the  pools  in  the  a)rdaRe 
mdustry  about  iSoo.     These  combinations  were  shortly  succeeded 
in  the  middle  of  the  -sixties  by  the  organization  of  the  Michigan 
Salt  Association,  and  the  tirst  anthracite  coal  combination  ap[K^ars 
to  have  been  formed  in  iS; i.    The  pools  of  the  anthracite  coal  roads 
continued  a  more  or  less  intermittent  and  spasmodic  existence  down 
to  the  passa.£;e  of  the  Interstate  Commerce  Act  of  1SS7.    Both  the 
se\-enties  and  eighties  were  characterized  by  numerous  combina- 
tions of  the  same  type.    Am.onjr  these  may  be  mentioned  the  West- 
er Lxport  Association,  the  United  Retlnins,'  Company,  Gunpowder 
-Manufacturers'    Association,    Kentucky    Distilleries'    Association 
\\  ail   Paper  Association,  Sand   Paper  Association,   UphoLsterers' 
iTlt  Association,  Standard  Knvelojje  Company  and  others. 

Space  permits  the  reproduction  of  onlv  three  tlocuments  showing 

the  torm  of  organization  and  methods  of  these  early  combinations 

So  brut  an  examination  may  be  justified  first,  bv  the  fact  that  these 

I    pools  are  now  chiefly  01  historic  interest,  and  second  that  their  or- 

•-   |:anization  and  methods  of  operation  have  in  nearly  every  case 

.:    Ijeen  substantially  reproduced  in  more  recent  combinations  whose 

a.;,'reements  will  be  shown  in  other  chai>ters. 
I  Ihe  lirst  exhibit  in  the  foljowinp;  panv^  is  the  pooling  agreement 
1  of  the  Gunpowder  Manufacturers,  which  was  adopted  April  2^, 
I  i.S;2-  In  essence  it  is  a  simple  agreement  for  the  maintenance  of 
1  prices.  In  the  second  agreement,  that  of  the  Kentucky  Distillers, 
_  wc  have  an  example  of  a  pool  formed  primarily  to  divide  output 


IKDUSTKIAT.   C.MTUNVTK.NS    AN.   TrVST. 

,nd  limit  pnKluction.  In  the  ^>y;;|^ -^;;;:;;;i;k-  Se  :S' n^ 
SanSd  Knv.U.pe  Company  -^,^^^i.  ,n!  Knvclope  C<.mpany 
einf^combimitionolthcthrce      I      -^^  ^„.  §5,100.  >ncor- 

S  1  Ma-achusetts  corporation  ^  »  ^  '  ^  ,,.^,  „  convenient 
;  ;;^d  by  certain  envdopeim^nu^^- -.,,,, ^  ^,„,  ,d 

method  of  harmonixmg  ^'^  ,  "^,  ;Si„„  ^l  profits  and  expen^e>.    A 
vvni  ined  a~  a  medium  U-r  the  P«"""^ .'  ,  „,vided   an   arranRement 

:S::  tl   -PP'--;:;:i„;£:r  ^^lld  rat.,  and  al=o  for  equal- 
for  ec,uali/in.U  and  keep.  fU'nee.al 

izing  lo.>es  and  expense..     Ld. 

Exhibit  1 

.    r.v    TIIF    MWIFACTURERS    OF    GUN- 
ABTTCLFS   OF    ASSOCIATION    Ot    TIIF     .1  A. 
ARTICLES    ur  ptjY^DF.R  ' 

^.  the  under.i,ned.  M-^-^- ;;;^;;-:Sand  \;n;rS; 

,o  c  of  ensuring  an  ^^^''^^V^^^^  '^  herd)y  af^rce  to  the 
IX  of  poNvdcr  throuKhoutthe  In  Ud  Ma  .  ,  ^^^^^^^^^  j^, 

Sbioined  Article,  of  Association,    ''™„d  honorable  aclhercnce. 

:;!:"...  and  all  under  our  -f  ^J' J^  '!C'GvNVO^v^KR  Trade 
';st.-Thi.  Association. haUUcaUcl.  ^^^^^^  ^^^^^^^^.^^^ 

ASSOCIATION    OF    Tin:   1-M^^.D  ^TATF  ^^^  ^^^^^^  _^^^^^.  ^^^  ,^^,^^,,^,    , 

facturers  of  Gunpc.vder  ^^    ^^^^  organization  being  composed 
„,v  he  a.lmitted  ^^-■^,f;  :^  ;,'    n   t  ed  to  representation  and  Note 

al  all  mect.n-  ol  ^^^  ^.^^^^^^_ 

F.  I.  Dupont  de  Nemours  .V  Co ^^^^  ^.^^^.^^_ 

Hi/ard  Powder  Company Votes. 

LanU  Rand  Pcnvdcr  Company....  ru.^^^_ 

Oriental  Powder  MiH> p^^^^^  yotes. 

Austin  Powder  Company y^^^^.^_ 

American  Powder  (  <.mpany ^.^^^^  ^.^^^,^_ 

Miami  Powder  Company    

S  prices  -vhicl.  «;;.«  al»  ffl'  „o"d„"™'l"«"™'-  "  ^'"'"A,  Iw 


1 


Specimens  of  I'ari.v  Poomng 


2d. — The  tifficers  of  this  A^^>)ciali()n  shall  he  a  President, 
\'iix-rre.--iil<.;it,  Secretary,  and  Trea>urer,  to  be  elected  by  ballnl 
on  the  first  meeting  of  this  Association,  and  annually  thereafter, 
and  who  shall  hold  oflice  until  others  are  elected  in  their  stead. 

,^d. — it  shall  be  the  duty  of  the  President  to  preside  at  all 
meetings  of  the  Association,  and  on  the  written  re(|uest  of  two 
members  thereof,  to  cill  sjiecial  meetings  of  the  same.  In  case 
of  h.is  absence,  the  same  duties  w  ill  devolve  upon  the  \'ice-Prcsidcnt. 
The  Secretary  shall  attend  ail  meetings  of  the  Association,  keep 
full  record  of  their  transactions,  and  issue  such  notices  to  the 
associates  as  the  projierly  authorized  officers  may  direct.  The 
Treasurer  shall  have  the  custody  of  all  funds  belonging  to  the 
Association. 

4th. — This  Association  shall  meet  quarterly:  say  in  the  first 
week  in  February,  May,  August,  and  November,  of  each  year, 
at  such  time  and  place  as  may  be  agreed  upon  at  the  previous 
quarterly  meeting,  for  the  purpose  of  establishing  prices  if  need 
be,  of  hearing  and  deciding  appeals,  and  tletermining  all  ciuestions 
relative  to  the  trade  that  may  be  submitted  to  it. 

5lh. — A  Council  of  tive  peisons,  associates,  of  whom  three 
(3)  shall  constitute  a  quorum,  shall  be  elected  by  this  .■\ssociatu)n 
at  their  first  mee'.ing  for  organization,  and  annually  thereafter, 
holding  oflice  till  the  election  oi  their  successors,  in  default  of  such 
annual  election.  Such  Council  shall  meet  weekly  (or  at  the  call 
of  the  chairman)  in  the  City  of  New  York,  or  elsewhere,  as  a 
majority  of  Council  shall  decide.  To  said  Counci'  -hall  be  referred 
all  cfuestions  of  discrepancy  and  deviations  fro.n  prices  in  the 
difTerent  home  markets,  all  complaints  in  writing  of  infraction 
of  agreement  liy  any  agent  of  any  associated  company  or  firm; 
they  shall  adjudicate  ujion  the  same,  and  the  decision  by  a  majority 
of  the  Council  shall  be  linal;  pro\ided,  that  any  associate  ag- 
grieved by  su'h  decision  may  appeal  to  the  next  quarterly  meeting 
of  the  Association,  pending  which  he  must  submit  to  the  decision 
of  the  Council. 

0th. — Any  manufacturer  of  Gunpowder  desiring  to  be  admitted 
a  member  of  this  Association,  may  at  any  time  signify  his  wish 
in  writing  to  the  President  thereof;  when  upon  adnnssion  and 
on  his  signing  the  .Articles  of  Association,  the  said  manufacturer 
is  at  once  entitled  to  [iarlicif)at(.'  in  its  benefits,  as  he  is  likewise 
bound  by  its  obligations.  Xo  member  of  the  Association  shall 
withdraw  from  the  same  without  having  signified  his  intention  so 


4  Industrial  Ctniisis  \tions  and  Trusts 

t„  .1,.  It  k'a.t  thirty  .lays  iRinre  such  withdnaval,  to  the  President, 
u ho  shall  at  unce  call  a  special  meetin.t;  of  the  Ass(.ciatio_n. 

7lh  --The  minimum    prices    [or    powder    of   the  yan.jus  sorts 
required  for  the  tra.ie  shall  he  e:  tahli.hed  and  re-ulated  by  this 

"■"^^Sth'-Xny  funds  nece^>ary  f-r  the  carryin-  out  the  provisions 
of  these  Articles  shall  he  a.se>sed  by  the  founcil  upon  the  asso- 
ciates in  proportion  to  the  votes  to  which  they  are  respectively 

'"'"J\h'— These  \rticles  shall  not  be  altered  or  amended.,  except 
bv  a  vote  of  two-thirds  of  the  members  oi  the  Association  at  a 
rcKular  quarterly  mcetin-  an<l  after  at  least  thirty  days  notice 
o["the  proposed  alteration  or  amendment. 


EXIIIIUT    2 

PROCEEDINGS    (IF    THK    KKNTrcKV    DIsTIl.I.F.RS    AT    THEIR    MEETING 

IN    l.Ol'ISVn.I.K,    KENTlfKV,    MAY,    lS8S  1 

ist.  Determine  the  quantity  of  whisky  to  be  made  in_  i88q. 
On  this  point  1 1.000,000  ijalluns  is  recommended  as  the  maximum. 

-d  Of  this  quantity  kl  tluTe  l)e  distributed  under  the  follow- 
in'^'  rule>  0.000,000  ;:allons,  leaving  2,000,000  gallons  as  a  reserve, 
t.rbe  placed  in  the  hand:,  of  .1  committee  of  ten,  consisting  of  two 
from  each  collection  district,  to  be  allotted  in  such  quantities  and 
to  such  signers  as  in  the  judgment  <if  the  committee  may  be  re- 
quired to  even  up  the  shares  of  each,  when  any  injustice,  all  facts 
duly  and  impartially  considered,  has  been  done  under  the  rule. 

(d.  Take  the  surveyed  cajiacity  of  the  distillers  of_  the  State, 
and  after  excluding  from  consideration  all  houses  with  a  daily 
capacitv  of  less  than  40  bu.hrls,  ascertain  the  per'-entage  of  capac- 
ity actually  used  for  an  assumed  period  of  156  days  in  producing 
the  crop  of  iS8t),  if  the  distillery  was  not  t)perated  in  1887,  or 
the  crop  of  1S87,  or  an  average  of  the  two  years,  whm  no  production 
was  made  in  18S6  and  1SS7,  the  comnuttee  shall  make  a  basis 

fairly  and  justly. 

4th.  Having  ascertaimd  as  above  the  actual  (HTcentage  ot  ca- 
pacity used  bv  each,  multiply  the  surveyed  cai)acity  by  this  i^er- 
centage  and  thus  ascertain  the  number  of  bushels  required   to 

'House  Report  X...  4if',S.  .•ioth  ("""«■.  ^nrl  Session.  1888,  pp.  ,3,?-^^6.  This 
agreement  followed  one  ol  similar  character  adopted  in  June,  iSS;.— Ld, 


Specimens  of  Kakiv  Pooling 


have  produced  the  quantity  (if  whisky  in  a  run  uf  156  days  that 
each  ai  t'lally  produced  in  i.SS()  (.)r  iSS-j,  or  the  average  as  may  be 
takrii  a^  tile  l)a>is. 

5tli.  lla\ing  thus  ec|ualized  all  the  houses  and  ascertained  the 
relative  nuniljer  of  bushel-  daily  capacity,  multiply  this  daily  ca- 
pacity by  104  days  and  4'.^  gallons  to  the  bushel,  and  ascertain 
the  gallons  each  is  entitled  to  make. 

Add  these  shares  together,  and  if  the  total  is  less  than  q.ooo.ooo 
gallons,  increase  the  days  from  104  to  the  number  recjuired  to 
produce  the  9,000,000.  If  the  total  exceeds  q.ooo.ooo  gallons, 
reduce  the  days  to  the  numljcr  rc(|uirt'il  to  produce  the  9,000,000. 

The  different  houses  are  entitled  to  make  the  shares  thus  ob- 
tained in  .-^uch  time  during  the  season  from  July  i,  1S88,  to  July  i, 
iS.Sr),  as  may  suit  their  convenience. 

The  committee  will,  after  the  above  appointment  is  made,  re- 
ceive applications  for  allowance  out  of  the  2.000,000  reserved, 
lixing  a  dale  in  the  future  by  which  time  all  applications  are  to  be 
filed  with  the  committee.  The  allotment  will  be  made  not  to  ex- 
ceed the  2,000,000  gallons  in  the  aggregate,  and  in  such  quantities, 
if  any,  to  each  applicant  as  the  facts  presented  may  justify. 

')th.  'J"he  committee  shall  furnish  each  distiller  with  a  statement 
of  the  share  to  which  he  is  entitled  under  the  rule,  and  also  a 
statement  of  the  allowances,  if  any,  made  out  of  the  reserve;  said 
statements  to  be  signed  by  the  committee. 

7th.  Five  members  of  the  cou'.mittee  shall  constitute  a  quorum 
for  business,  but  no  allotment  shall  be  made  except  at  hxed  time 
or  times,  of  which  ten  days'  notice  must  be  gi\en  each  applicant 
in  writing.  Xo  member  shall  sit  as  a  committeeman  in  considering 
his  own  application. 

Sth.  The  distillers  forming  this  agreement  shall  elect  a  board 
ot  trustees,  to  consist  of  seven  members,  whose  duty  it  shall  be  to 
enforce  the  agreement.  The  committee  described  in  sections  pre- 
ceding this  section  shall  be  charged  with  the  duty  of  obtaining 
to  the  agreement  the  signatures  of  such  distillers  as  may  be  absent 
at  the  meeting,  and  shall,  when  this  work  is  performed,  deliver 
to  the  chairman  of  the  board  of  trustee>  this  agreement,  and  a 
statement  giving  the  shares  of  each  distiller. 

i;th.  The  board  of  trustees  shall,  within  ten  days  after  their  elec- 
tion, elect  a  chairman,  and  is  herein'  authorized  and  directed  to 
secure  an  ofl'ice  in  the  city  of  Louisville,  and  to  ap[X)int  a  compe- 
tent secretary  and  lix  his  >alary.     The  >ecretary  shall  keep  a  full 


6  Industrial  Comiunations  and  Trusts 

section  lo.  .  ,        ,  -linTtpd  to  '^cnd  the  sec- 

loth.  Each  distiller  ^V^^^f.^X^l\connA.i.  state- 
retary,  wl^n  tl^  «ft'-^;j!^^^\,t-  -Ahs,  the,]  in  his  dis- 
nient  ,.f  the  I^VS"  and  1887  ^\'^.^^'^'f :,  '\^^  ^„  „,,>  ,th  of  each  suc- 
tillery  bonded  warehouses,  and  from  ^J^         ;      \-^j  ^j        ;,,  by 

barrel  deposited  m  bond.  ■     „  nioneys 

Jcars  a,  of  .he  last  .lay  of  •l';;!'-^:'  ]';■;,';;;.";.  -an,,,  a,  .ha. 

-kt,slra,,;i""^;!^rr?;;'Sv;';i^;;;^^s- 

i-vriMi.>rrp\vird  for  t'cir  consideration.  , 

'       \Vent  of  a  .V  dispute  or  controversy  except  as  provided  m    1. 

'"S  ^illTe"Jlccteel  bv  the  convention  a  committee  of  fjvc 
men   one    rtm  each  "election  district,  .ho  ^hall  l>e  known  as  the 
boardTappe.1   to  whon.  anv  party  who  deems  himsel.  agsru've. 
br^;'atliment  of  capacity  ^^V  ^^r^'^";:^,^^^^^:: 
made  "in  ten  days  after  notice  of  allotnu-t  and  In.  da>s   noi.ce 


Specimens  ok  Early  Pooling 


7 


given  to  the  committee  from  whom  the  appeal  is  prosecuted,  and 
the  decision  of  said  committee  to  be  made  in  ten  days  and  be  final. 

That  the  committee  to  ol)tain  the  signatures  to  the  contract 
shall  not  deliver  the  same  to  the  trustee  until  said  contract  shall 
be  sij^ned  and  aijreed  by  S5  per  cent,  of  distillins  capacity  of  the 
State,  excluding,'  from  such  capacity  those  producing  only  high 
wines,  alcohol,  and  neutral  s[)irits. 

The  delivery  of  the  contract  shall  be  conclusive  evidence  that 
>aid  terms  have  been  complied  with. 

That  the  allotmen'  committee  is  authorized  to  employ  a  secre- 
tary and  t'lx  his  salary  for  the  time  they  shall  be  in  existence. 

I'he  following  committees  were  then  ap[)ointed: 

AI.I.OTMF.NT   COMMITTEE 

Second  District. — M.  \ .  >ronarch  and  Geo.  I).  Mattingly. 
Fifth  District.— T.  H.  .sluTJey  and  R.  \V.  Wathen. 
.S'/.i7//  District — T.  J.  .Megibben  and  William  .\dams. 
.Scirnth  District. — K.  H.   Taylor,  jr.,  and  Jos.  .M.  Kinibrough. 
Eighth  District. — John  B.  Thonij)<on  and  I).  L.  Moore. 

APPEAL  C(>M.MirTLE 

Srcoiui  District. — R.  Monarch. 
/■/////  /;/,s7r/V7.— Xich(i!a>  .Miller. 
Sixth  District.~E.  \\  .  Bramble. 
Scioith  District.— }dmi.-^  .M.  SalTell. 
A/i;/;///  Z>/.j/r/V/— Walter  Bennett. 


The  biiar<l  of  trustce>  fur  tln'  enduing  vear  are:  — Herman  Beck- 
urt--.  I  M  Aliurldii.  Nicholas  Miller,  D.L.  .Moore,  Jas,  McSorlcy, 
R.  .Mi)narth,  S.  J.  .\shbrook. 

I'he  followini;  resolutions  were  olTcred  and  adopted: 

By  Mr.  .Megibben:  That  the  allotment  comnuttee  is  authorized 
to  confer  with  the  committee  of  the  highwine  trust,  and  if  possible 
secure  the  stoppage  of  production  of  bourbons  by  said  trust  in 
this  and  other  States. 

By  .Mr.  laylor:  That  a  conuniltee  of  three  lie  a[)pointed  by  the 
chairman  to  sec  the  Commissioner  of  Internal  Revenue,  with  a  \iew 
to  call  his  attc'  'on  to  and  snk  protection  from  vicarious  manu- 
facture at  registered  distilleries,  and  the  manufacture  of  what  are 
known  as  "new  process"  whiskies  in  this  State. 


8  iNDisnuAi.  Combinations  and  Tri-sts 

Committ..     appointed:     K.  H.  Taylnr,  jr.,  T.  11.  Shcrley,  T.  J. 

^^Bv  MrShcrlcv:  \Vhrrv.i>.  A  i~  thr  pr,:,  tier  ol  a  number  (.f  dis- 
tillers.'afler  tho  I'.acka.o  have  l.cvn  inle.!  fro.n  the  reee>v>ng  cistern 
I  force  hut  air  into  the  packages,  or  hy  <.h.r  l>nHe^e>  n  cnh 
the  spirit,  and  -ive  them  the  appearance  m  older  kuo<1>.  the  same 
beinj:  phieed  on  ih.e  market  a.  the  re;4ular  bourl)on  or  sourma>h 
whi.kies:      Therefdre  he  it  ,      ,-,   , 

Rcsohrd,  That  all  whiskies  that  under-o  any  treatment  alter 
they  have  been  put  i.Uo  the  barrel^  be  known  to  the  trade  as  new 
process  Nvhiskv,-  and  shoul.l  be  so  brandch  Uelerred  to  special 
rommitteeoi  three  to  lay  before  the  C.mviiissioncr. 
"  By  Mr.  .\therton:  Rrsohrd,  By  the  di.tillers  .  •  Kentu;k>,  m 
convention  assembled,  that  vve  are  oppose<i  to  the  repeal  ol  the  tax 
on  fruit  brandies  as  ruinous  to  our  trade,  opening  l '-  door  to  Iraud, 
„nd  destructive  of  the  whole  internal-revenue  sy.-i.  n.  Also  to  the 
proposition  to  operate  any  distillery  without  the  supervision  of  a 
Government  store-keeper  as  n<iw  provided  by  law.  _ 

The  allotment  committee  under  the  Kentucky  distillers  agree- 
ment for  iSSS-\So  have  organized  by  electin-  (  ol.  I.  H.  Sherley 
chairman,  and  T.  M.  C.ilmore  secretary.  ,.,     ,•      ,     ,u„ 

In  accordance  with  the  di-tiller>'  a-reement.  which  directs  the 
trustees  to  organize  within  ten  days  after  their  election,  a  meetinK 
of  that  body  was  called  for  ^  p.  m.  of  the  2d  instant  at  the  ot  ice  ot 
the  CirculaV.  in  this  city.  Tho-e  present  were  llernuin  Beckurts. 
Tames  McSorlev,  John  M.  .\therton,  and  Nuhola.  Miller,  l.  ^. 
Ashlmx.k  K.  Monarch,  and  I).  L.  Moore  were  i^i.-ent  by  proxies. 
*Mr  Herman  Beekurts  was  unanimousl)  elected  ehairm.m  for  the 
ensuin-  year,  which  ofLcc  he  accepted.  T.  M.  Ciilmore  wa.  electe.l 
secretary. 

CONIKA'T 

Louisvii-LK,  Kv.,  .ir7y  24,  1888. 

The  under-imud  do  mutually  aprcc  and  covenant  each  with  all 
and  every  the  other  siRners  hereof  and  of  cerlilied  true  copies  ol 
the  same  as  follows,  to  wit: 

l-'ir^l  It  is  for  the  pecuniary  advantajje  of  each  and  every  tne 
parties  hereto  that  each  and  every  the  other  i)arties  should  not 
make  more  whiskv  during  the  season  from  July  1,  iSSS,  to  Jvly  '. 
1889,  than  is  hereinafter  set  down  ..i^posite  the  signature  ol  the 


Sl'lXlMIAS    ()!•     KaRLV    PlmjLI.NG 


several  parties  as  their  airrecd  production  (iurin.u:  said  distilling  sea- 
son, which  amount  shall  l>c  fixed  and  determined  hy  the  committee 
of  allotment  selected  and  a|iMointed  and  authorized  to  act  in  ac- 


cordance with  the  rules 


am!  reLT 


ulations,;!S  provided  in  the  resolution 


adi^jted  hy  the  Kentui  ky  di;  ller>  in  convention  assembled  on 
.May  24,  18.SS,  and  hy  the  tru>iees.  set  opjKJsite  their  sif,'natures. 
StYfliuI.  It  is  further  a,;;;reed  that  the  several  parties  hereto  can 
and  do  enter  into  this  agreement  with  t!ie  other  parties  hereto, 
and  a-sume  the  ol)lii:ations  hereinafter  e\])ressed,  u[)on  the  mature 
and  deliberate  con\iction  that  it  is  for  the  pecuniarv  benetit  of 
each  so  to  do. 

T/iird.  And  the  parties,  in  consideration  of  the  jjremises  and  of 
Si  to  each  the  other  paid  and  of  divers  other  valuable  consideration 
each  of  them  movins;,  do  mutually  aj:;ree  and  covenant  that  they 
will  severally  make  during?  the  distilling  season  from  July  i,  1S8S. 
to  July  I,  1SS9,  the  quantities  of  whisky  to  he  determined  and  set 
ojipositc  their  signatures  as  hereinbefore  provided;  with  full  liberty 
and  rif,'ht.  however,  to  each  and  every  siiinatorv  hereto  to  manu- 
facture as  nnich  more  whisky  as  he  may  choose  upon  the  conditions 
hereinafter  set  forth. 

i'oiirth.  If  any  party  lnTeto  diail  conclude  to  make  and  does 
make  whisky  in  excess  of  the  amount  m)  to  be  ascertained  and  set 
oppi'site  his  name,  he  shall  and  will  pav,  and  hereby  covenants 
and  agrees  to  pay,  within  thirty  days  after  the  i  -,1  day  of  July,  1889, 
unto  the  trustees  hereinafter  named,  a  sum  of  money  eijual  to  20 
cents  for  each  proof  j^'allon  <;f  whisky  so  by  him  mad'e  mi  excess  of 
the  production  set  opposite  his  signature;  the  same  to  be  distributed 
by  the  -aid  trustees  unto  the  other  signatories  hereof  not  producing 
mure  than  the  amount  set  opposite  their  names  as  compensation 
to  them  for  their  refrainin-,'  from  so  doin^j;  and  to  re-imburse  to 
them  the  profit  which  they  surrendered  by  not  makinj^  a  Rreater 
amount  ..|  whi-ky  than  is  opposite  tiieir  names  sot  forth,  and  as  an 
otlset  to  the  increased  profits  to  such  overproducer.  The  said  dis- 
tribution shall  be  l)y  equal  pro  rata  amonf^  tho.se  not  making  more 
than  i,-  set  opposite  their  names,  based  upon  the  contemplated 
I>roduction  of  each  as  set  forth. 

/■'////.  And  the  parties  hereto  recognizing  fully  the  rip;ht  of  each 
to  make  as  much  whisky  as  he  may  choose,  aKree  and  covenant 
that  the  siid  sum  of  20  cents  per  Ralion  so  to  be  com|)uted  is  a  fair 
and  just  compt-nsation  and  is  fixed  as  the  liquidated  and  indis- 
I)utable  remuneration  to  be  made  by  sue  h  produc  t  r  to  tho.sc  parties 


lO 


!M)USTRIAI.    CoMlUNATIONS   AND   TrLSIS 


hcrcK.  ^vlv,  tnr  his  pn.tU  an<l  at  this  request  refrain  f^'""  n^^;"{; 
more  than  therein  lly  them  indicated  and  thereby  lose  proht  .n.eh 

^'';^vS;'''\ha-^He;n.r  iS^cUurts   I).   L.   Moore    R^  Mo,..cl. 

T    M    Uherton   Jaraes  MeSorlev,  Nick  Miller,  and  b   J.  Ashbrook 

1; '!;a;^d  as  t;itees,  and.the^-,or  a  majority  o.  then,  may  sue 

f„r  anv  ^uch  remuneration  in  their  oun  names   a^  trustee^  tor      e 

H      ot  tho.e  concerned;  and  all  outlays  and  expenses,  inclu   ing 

•out"  1   ee     shall  be  paid  out  of  the  fund  as  provided  in  section  lo 

jrlesolutions  ad.U-1  «'"  ^lay  .4,  ''^ ^"st^er^  mee^n  ^ 

\nv  vacancy  occurrin-  in  said  trusteeship  by  d'.Mth,  "  iRnat  on, 

refusal      at,  or  other  disability  shall  be  hUed  by  the  other  trustee. 

The  tmstees  may  call  meetings  of  the  sipialorie.  at  any  time  on 

ten  days'  notice  pven  throu-h  the  United  States  mail. 

tS  no  party  to  this  agreement  shall  rent,  lease,  or  otherNv.sc 
dis  ose  of    lie  distillery  ,.ro,,er.y  owned,  operated.  "J  controlled 
v'him  or  them  for  the  purpo-        '  manutactunn,  therein  ay 
u  mtity  ..1  distilled  spirits  beyc  a^  amount  apportioned  ami 

2b  t  1  to  bin.  or  them  hereunuer;  an  1  anything  ^0"^  or  device 
Ji^orted  to  for  such  purpose  or  ^vith  such  intent  or  efTect  >hall 
render  ^uch  party  liable  for  all  damages  as  herein  provided. 

\ny  .ignatorv  hereof  shall  hase  the  right  to  transfer  his  albt- 
nn'nt  hereunder'and  the  right  to  manufacture  the  same  to  any  o  he 
si.Mialorv.  in  which  case  the  signatory  so  acquiring  may  at  hi    o  s u 
dUtillery  or  that  of  the  transfer  manufacture  such  allotment  in  ad- 
dition to  his  own  personal  allotment.  . 

For  the  purpoH-  of  obtaining  signatures  to  thi.  agreement  copies 
thereof  may  be  circulate.!,  each  copy  io  be  authenticated  as  a  true 
copy  by  th'e  chairman  of  the  allotment  committee,  namely  .  i  1 . 
Sherle/.  and  signatures  to  such  copies  shall  have  full  elTect  as 
Uiough  made  t^  the  ori'/mal  paper,  and  all  such  copies  and  the 
original  shall  be  held  and  treated  and  have  elTect  as  a  single  paper. 

Exhibit   ^ 

AGREEMENT  OF  ENVELOPI.   .\IANrF.\CTL-Rt:RS  2 
Thi^  agreement,  made  this  21st  day  of  June,  1887,  between,  the 
Morgan  KnveU.pe  Company,  the  Whitcomb  i'.nvclope  Company, 

1 S;!:^'"  :?1£ So-^^t^Commi... •■  ..n  Ccncral  Uws on  Inve.ligution  Relative 
to  Irusis,  N.  Y.  Sen.  Doc.  No.  jo,  \888,  pp.  4<j8-470- 


SPF.CIMKNS    OK    KaRLV    PooI.IXG 


IX 


the  White,  Ccrbin  &  Co.,  the  Ilolyoke  Kinelnpe  Companv  the 
1  limptoii  .ManulucturiiiK  Company,  the  Ucrlln  cV  i,,ne-  Knvelone 
Company,  Samu  ■!  Raynor  &  Co.,  J.  O.  Preble  &  Co..  ,in,i  Lewis 
J.  I  ower.s.  domjr  business  under  the  name  of  JJowers  Paper  Com- 
lur.y,  parties  ol  the  first  i)art,  and  the  Standard  Enveh>pe  Com- 
juny,  party  of  the  second  part. 

U-itiussclh:  I.  The  parlies  of  the  first  part  hereby  severally 
a-.Tee  that  withm  fifteen  days  after  the  fir>l  day  of  each  and  eyer'y 
calendar  month,  be.i,nnnin>,'  with  the  month  of"  Au-nist  next  they 
or  it  will  render  a  sworn  statement  to  the  party  of  the  second  part 
addressed  to  its  treasurer,  of  the  total  nunii.er  of  thousands  of 
envelopes  they,  the  said  parties  of  the  first  part,  respectively,  shall 
have  sold  and  deliwred  <lurinfj  the  previous  calendar  month,  speci- 
yinj,'  in  said  statement  how  many  of  the  envelopes  so  sold  and  de- 
li v.'red  bythem  or  it,  have  Ixen  s.,ld  and  dilivered  to  any  of  the 
oilier  parties  of  the  tir^t  jKirt  named  in  this  agreement.       " 

-'.  i  he  i)arties  of  the  first  part  hereb-  severally  further  a^ree  to 
i'ay  to  the  Standard  Envelope  Comi)any,  on  the  lilteenth  dav  <>.- 
ttie  .same  month  in  which  such  statement  is  to  be  made,  by  the  t.'rms 
Hereof,  a  tax  of  lut.rn  c  ^ts  upon  each  and  every  thousan.i  en- 
\ elopes  so  sold  and  delivered  bv  them  or  it,  except  upon  the  en- 
velopes so  sold  and  delivered  by  them  or  it  to  any  of  the  other 
parties  ot  the  tirst  part  named  in  this  a-^'reement.  'rhis  rate  of  lax 
iiuiy  at  any  time  be  changed,  by  th,'  Nvritten  assent  of  any  seven 
ol  the  parties  herein  named  as  parties  of  the  first  part.  It  is  under 
st.HMl  and  aureei,  however,  by  and  between  the  parties  to  thi, 
aLTeement,  that  no  monthly  statement  is  to  be  r.c|uired  and  n.. 
ninthly  tax  is  to  be  paid  up,.n  the  envelopes  which  are  excluded 
rom  the  terms  and  o()eration  of  the  written  afjreement,  of  even  date 
herewith,  between  the  Morjjan  Envelope  Comp;uiv  and  tw.ive 
-  her  manu, .cturers  of  enveloi,es.  parties  of  the  lirst'parl,  and  the 
Man.  ard  Envelope  (  ompany.  part  '  of  the  second  part. 

^.  Whereas  said  Standard  Einclope  Company,  by  written  in- 

Mrument   dated  on  or  about  .April  ,^o.  iSS;,  ha,;  contracted  with 

v  l.rm  of  Pester  ^- Wa^ley.  of  Norwich.  Cnnn..  for  the  purchase 

'  all  envelope  machines  to  be  made  or  sold  by  them  durini;  the 

ae  years  then  next  ensuing  (said  Lester  &  Wa.sjey  having'  therein 

a^'reed  not  to  furnish  more  than  twentv-fo-ir  machines  duri-i-r  any 

"He  year),  the  parties  of  the  tirst  part  hereby  severally  ai-ree  to 

purchase  of  said  Standanl  Envelope  Company,  and  to  piy  therefor 

•  Thus  in  original.— Ed. 


12  IvurSTRIAl.   COMBIN  \TIOXS   AND   TRUSTS 

l,r>t  part  ^';;^"     ,  ^  i^^^^;^  .    ^^  :  said  Standard  Envelope  Com- 

'  /-tthc  itormance  of  this  a«rocmcnt  the  parties  here  o 
scir-  1  V  b^nd  themselves,  their  and  each  of  their  executor,  and 
.dn  ;  tr  or  .  ^uccessc.rs  and  assigns,  for  the  term  ot  tive  year. 
In  t^^e's  whereof  the  various  parties  hereto  have  several  y  set 
their  tnds  and  seals,  the  day  and  year  hrst  above  mentionea. 
(Here  follows  list  of  signatures.) 


niAPTER  IT 


Ri;rRr.si:\T\rivi;  trusts 


NOTE 

Sixrr,  the  pool  was  primarily  only  a  gentlemen's  agreement  and 
its  provisions  and  regulations  were  unenforeihle  through  the  courts, 
it  possessed  certain  disadvantages.  But  since  the  pool  has  persisted 
throughout  the  entire  course  nf  our  industrial  history  since  the  Civil 
War  and  has  been  the  form  under  which  some  of  our  more  recent 
combinations  have  operated,  it  may  be  asserted  that  these  dis- 
advantages have  been  somewhat  overestimated.  Vet  it  is  none  the 
less  true  that  there  were  certain  undesirable  features  connected 
with  it  and  very  shortly  a  new  form  of  combination  was  devisee! 
known  as  the  'l>ust.  For  many  years  it  was  supposed  that  the 
Standard  Oil  Trust  of  1S.S2  was  the  first  agreement  of  this  character. 
More  recent  revelations,  howc\er,  have  shown  that  the  original 
Trust  agreement  was  made  by  this  comj)any  in  iSjq.  In  conse- 
quence, both  the  agreement  of  1S70  anc'  that  of  1882  have  been 
included  under  this  group. 

I  he  Mandard  Oil  Company  did  not  long  retain  the  monopoly 
"I  thi>  new  scheme  of  combination.  Others  saw  plainly  the  ad- 
vantages it  affcrded,  and  speedily  adojjted  it.  In  the  latter  part 
of  [8S4  the  American  Cotton  Oil  Trust  was  organized  in  the  State 
of  Arkansas.  It  embraced  some  eight  v-t"i ve  concerns  doing  business 
throughout  the  .South.  In  1SS7  three  other  Trusts  were  formed. 
The  Distillers"  and  Cattle  Feeders'  Trust  was  a  successor  to  the 
Western  F\[iort  .Association,  a  pool  of  the  whisky  manufacturers 
north  of  the  Ohio  River  which  had  been  organized  in  iSSi.  The 
"liur-  organized  in  the  same  year  were  the  National  Lead  Trust 
and  the  Sugar  Tru^t.  The  technic.d  name  of  the  latter  combination 
v.a>  the  Sugar  Rehneries  Company.  It  may  ,d-o  be  noted  than  an 
abortive  attempt  was  made  to  organize  the  (drdagi  Industry  into 
a  I  rust. ^  The  Trust  agreements  reproduced  here  are  all  at  the 
present  time  well  known  documents  but  it  has  none  the  less  seemed 
ad\i>able  to  include  them  in  the  space  of  this  book  for  sake  of  com- 
l>!eteness  and  fur  purposes  of  analyzation.— Ed. 

13 


14 


Industrial  Comiunatiuns  and  Trusts 


EXHIIUT  I 


STXNPARD  on.   TRUST   AGREEMENT  OF    ^^79 

""n™:  in  considcra.i,.,,  of  .l,c  tovcsoins,  -d  of  the  sum  o(  o:,c 
I    •  .  t     n-  -viid   and  other  considerations  sati>lactrr>  to  u^,  %.t, 

to  wit : 

Entire  capital  stock  .-1  Lon-  Island  Oil  Company. 

,,  CO  shales  capital  stock  of  Devoe  Manufacturing  Co. 

Entire  capital  stock  of  Charlc-  Pratt  &  Co 

c,osc)  shares  capital  stock  ol  Baltimore  I  nited  O  1  Co. 

=  .-  shares  capital  stock  of  Keystone  Retinin-  Co 

^ni^c:^l\  .tock  of  Scne  ^.  Fleming  Manufacturing  Co.. 

Limited.  .    „    ■    •      r^ 

Kntire  canital  stock  of  Atlantic  Relining  to.  _ 

Enlire  cipital  stock  of  Standard  Oil  Co.  (ol  Pennsylvama). 

Entire  capital  stock  of  Model  Oil  Co. 

1,775  shares  capital  stock  oi  American   >f  ricat,.     0  1  Co. 

Fntiic  capital  stock  of  Camden  Con>olulated  Oil  Co. 

2,26S  shares  capital  stock  of  Central  KMin.ng  Co, 

700  shares  capital  stock  o    Maverick  Oil  Co. 

Entire  capital  stock  of  R.nuhlic  Rclining  C  o. 

400  shares  capital  stock  c(  Waters-Pierce  On  Co. 

,  .-        J  I  .1    ,.    r;    «;   nf   Umrica      In  the  Stinrcme 

PI).  414-410. 


Representative  Trusts 


IS 


:;oo  shares  capital  stock  of  Consoli(lr.t.e(l  Tank  Line  Co. 

Entire  capital  stock  of  American  Transfer  Co. 

41,500  shares  capital  stock  of  United  Pipe  Lines. 

Entire  interest  in  and  cajvital  stock  of  Paine,  Ablett  &  Co., 

Limited.  r   t-  r 

i4-''i75ths  of  entire  interest   in  and   capital   stock  of   Eclipse 

Lubricating  Oil  Co.,  Limited.  ^ 

7,  '4ths  of  entire  interest  in  and  capital  stock  of  H.  C.  \  an  Tine 

&  Co.  (Limited). 

7  Sths  of  entire  interest  in  and  capital  stock  of  Galena  Oil  W  orks 

(Limited). 

Entire  capital  stock  of  Smith's  Ferry  Oil  Transpn.  Co. 

14,713  (old)  shares  stock  and  interest  in  Producers'  Consoli- 
dated Land  &  Petroleum  Co. 

Special  investment  at  Oil  City,  Pa. 

Business  and  property  of  Star  Oil  Co.,  Erie,  Pa. 

Business  and  property  of  Warden,  Frew  &  Co.,  Philadelphia, 

Pa. 

Entire  capital  stock  of  Philadelphia  Retinins;  Co. 

Entire  capital  stock  of  Olean  Petroleum  Co.  (Limited). 

Entire  capital  stock  of  Columbia  Conduit^  Co.  and  also  all 
other  interests  of  every  kind  and  description  hekl  by  the 
Standard  Oil  Comjiany  or  in  which  it  has  any  interest  which 
can  be  or  by  ri^ht  ou^ht  to  be  divided  and  distributed  among 
the  iiarties  entitled  thereto,  without  alTecting  its  ]iroper,  le- 
<^itimate,  and  elTic.,-nt  operations  as  a  coq^xiration,  to  Myron 
R.  Keith,  George  F.  Chester,  and  George  H.  Vilas,  as  trust- 
ees, to  have  and  to  hold  said  stocks  and  interests  to  them  and 
their  survivors  and  successors,  in  trust  nevertheless  for  the 
following  purposes,  to  wit:  To  hold,  control,  and  manage 
the  said  stocks  and  interests  for  the  exclusive  use  and  l)enel:t 
of  the  following-named  persons  and  in  the  following  i)roportions 
named: 

Charles  Pratt 2700/35000  thereof. 

Horace  A.  Pratt 15  ,> 5000  " 

Henry  H.  Rogers yio  35000  " 

C.  M'.  Pratt 20o'350oo  " 

\Vm.  Rockefeller i6oo'350oo  " 

O.  ii.  Jennings 8iS'35ooo  " 

\V.  11.  Macy 59/3500°  " 


1 
I 


3 

A 


l6  TxDrSTKIM     CoMP.IWTloNS    AXD    TRI'STS 

\V.  II.  Macv.jr 28/35000  thereof. 

Estate  of  J-^iah  Macy 892,35000 

A.J.  Pouch i78.?5ooo  _^ 

J.  .\.  Bostxvick 1S72  35000  ^^ 

Warden.  Frew  &  Co 4^5-35000  ^^ 

Cha<.  Loekluirt 1408:35000  ^^ 

\Vm.  C.  Warden 12Q2/35000  ^^ 

O.  H.  I'avne,  trustee ^i ;35ooo  ^^ 

S.  V.  Harkne..? '-^-S  >.^oo°  ., 

H.  M.  Fla-ler 3000  35000  ^^ 

baniel  Bu.hnell 97  ,^50oo  ^^ 

Jos.  L.  Warden 9«  ,v5ooo  ^^ 

M.  Vanderi^rift 5003.5000  ^^ 

V.A.  Arter 35  35ooo 

GustaveHeve 17^:35000  ^^ 

L.  G.  liarkness 17S  ,>5000  ^^ 

Hanna  &  Chapin 263  35000  ^^ 

\.  M.  McGregor "^35000  ^^ 

1).  lirewster 409'35ooo  ^^ 

W.  C.  Andre\N> 90O  35000 

Il.iracr  A.  llutchuis iii;3500o  '^ 

Jnhn  1 ).  Arclihold 35° '35ooo  ^^ 

John  1 ).  RockeleUer S984  '35000  ^^ 

J.  N.  Camden 200  35000  ^^ 

W.  P.  Thomiison 132  ,35000  ^^ 

I).  M.  Harkness 323'350oo  ^^ 

O.  11.  I'avne 2637  35000 

John  lIuntinRton 5^4  3 5000  |' 

W.  r.  Warden 7'^  35oco  ^^ 

H.  W.  Payne 292/35000 

and  to  divide  and  distribute  the  same  as  .-^oon  as  they  can  t"nven- 
irml\  do  so  between  the  said  persons  for  whose  benetit  they  hold 
the  s'anie  as  aforesaid,  and  in  the  resi)ective  proportions  aforesaid; 
with  full  power  and  authority  to  the  survivors  of  the  said  trustees 
in  case  of  the  death  of  either  of  them  to  noniinat(>  and  ajtpoint  a 
successor  to  such  deceased  trustee  if  they  shall  think  it  expedient 
s;)  to  do  or  else  to  continue  the  said  trust  without  tilling  such 

vacancy.  .  •  1     * 

In  witness  whereof  the  Standard  Oil  Co.  has,  by  its  president 

and  secretary,  duly  authorized  thereto,  set  its  name  and  alli.xed 


REPRESEMATlVr.    'I'rUSTS 


17 


its  corporate  seal,  and  the  others  of  the  undersigned  have  hereto 
set  their  hands  and  seals  this  eighth  day  of  A[)rii,  A.  D.  iS7(). 

Stanoard  On.  CciMrANV, 
By  John  D.  Rockefeller. 

Frest. 
Attest: 

H.  M.  Flaoler,  Secy. 

(Here  follows  list  of  signatures.) 


Exhibit  2 
standard  oil  trust  acreiaient  and  supplemenial  trust 

AGREEMENT   tJF    1S82  ' 

This  agreement,  made  and  entered  ujion  this  second  day  of 
January,  A.  D.  1SS2,  by  and  between  all  the  persons  who  shall  now 
or  may  hereafter  execute  the  same  as  parties  thereto,  witnesseth: 

I.  It  is  intended  that  the  parties  to  this  agreement  shall  embrace 
three  classes,  to  wit: 

(i)  Ail  the  s-tockholders  and  members  of  the  following'  cor- 
1>' 'rations  and  limited  partnerships,  to  wit: 

Acme  Oil  Co.  (New  York),  Acme  Oil  Co.  '^Pennsylvania),  At- 
lantic Kermint;  Co.,  of  Phila.;  Hush  &  Co.  Limited,  Camden  Con- 
solidated Oil  Co.,  Klizabethport  Acid  Works,  Imperial  Rehninf^ 
Co.,  Limited,  Chas.  Pratt  &  Co.,  Paine,  Ablett  &  Co.,  Limited, 
Standard  Oil  Co.  (Ohio),  Standard  Oil  Co.  (Pittsburp;!,  Smith's 
Kerry  Oil  Trans.  Co.,  Solar  Oil  Co.  Limited,  Sone  &  Fleming  Mfg. 
Co.,  Limited. 

.\Is(j  all  the  stockholders  and  members  of  such  other  corporations 
and  limited  jiartnerships  as  may  hereafter  join  in  this  agreement 
at  the  re<iuest  of  the  trustees  herein  j)rovided  for. 

(  2)  The  following  indi\'iduals,  to  wit : 

W.  C.  Andrews.  John  D.  Archbold,  Lide  K.  Arter,  J.  .\.  Bostwick, 
H'  ni.  Brewster,  F).  Bushnell.  Thomas  C.  Bushnell,  J.  X.  Camden. 
IKnVy  L.  Davis,  11.  .\I.  Flagler,  Mrs.  H.  ^L  Flagkr,  H.  M.  Hanna, 
and  George  \V.  Chapin,  I).  M.  Harkness,  D.  ^F  Harkness,  trustee; 
S.  V.  Harkness,  John  Huntington,  H.  A.  Hutchins,  Chas.  F.  G. 
Heyc.  O.  B.  Jennings.  Chas.  Lockhart,  A.  AL  McGregor,  \Vm.  H. 
Macy,    Wni.    H.   Macy,    jr.,   estate    of   Josiah    Macy.   jr.,   \Vm. 

'  .AppendLx.     Report  of  Industrial  C'ummirsion,  \'ol.  I,  \t\i.  1221-26. 


i8 


Industrial  CoMmsArioNs  and  Trusts 


II 


Macy,  jr.,  exccuU,^.   CK   H. 


Pavnc,   O.    II.    Payne,    trustee; 


.xecutor.  O.  H.  ^y^^^^' ^^  Ivuch:  John  L 
Chas.  rratt,  Horace  A.  Tratt,  *.^.  -  •  '^;  .^^  w.  P.  'rhomi>^"n 
Rockefeller,  \Vm.  Rockefeller.  lUnrv  n. 


Ruckefeller,\Vm.RcKkefeller  1  no  il^  ':_  ^^.^^j^,^^  j,,eph  L. 
J.  J.  Vander,r.it  N,  m  '  •  ^^  -^-!|^  ^.  .vheaton,  Julia  H.  ^  ork, 
\Varden;\\a  ;len    Ire^v  .vv^^    ,  Chester,  trustees. 

^^S  .:^-.u;l^inJ^it!:  as  ;;i;hereafter  i.^  in  this  agreement 
-  {^  r!^:i:5rSSKSi^^^^^^^^  o.  the  fencing 

corporations  and  !i"^i!^<\P:;';!;;^'^^;'£'n;;re  United  Oil  Co..  Beacon 
American  Lubricatuifi  Oil  Co^.Pf^J'^Y      ^^^1  ^^,-,^;^^  Co.,  of 

Oil  Co.,  Bush  &  ^^•"^>'?^\^  ;",1\^  '  Chess-Carley  Co.,  Con- 
PiUsburp;  ClusebrouRh  ^5'-^""^? Jt^^;  Revstone  Refmlng  Co., 
solidated  Tank  Line;^^Lo.,  Inland  OCaK  ^^^^^^^^ 

Maverick  Oil  Co.,  National  ^  ^^  '^  J"  ^;^  ^o..  Signal  Oil  Works, 
Co.,  Producers'  ^on'd  Land  and  U  -1  um  L^^^      g^^^^ 

Limited,  Thompson  and  1    dU  ni  ^_^  ^^^^^^^^^  ^o 

Co..  Eclip.e  V;  '";;^^'"7-^,^   I  i  u\ed   (  alena  Oil  Works,  Limited, 
Limited,  Franklm  Pipe  J    -J'  ™^^  !,,,,;,  Mining  Co.,  Vacuum 
Galena  Farm  Oil  Co..  P^'-V^'l'.^^^^,j  Waters-Pierce  Oil  Co. 
Oil  Co.,  II.  C.  Van  line  &  <^ ''•;  ;'"\'^  J  ^V'      all  thereof)  of  other 


corporations  and  ImS^i'^^E^^^ 

this  agreement_at  the  recme^t  <-    ^^•^^'^^^^l^^^  ,^  ^,1,^  with  each 


IS  agreeiin.li>.  ">•  - .-  •  ^  ,    ,,1.^1-  to  and  with  each 

York,  rcnnsylyan.a  .uirl  -^^  J-;'^  >        ,,    ,  „isii„B  charter  ami 

mine  for,  produce  "^'^'^  '  \^,  ''^,.,nals  used  in  such  business, 
and  all  its  products,  and  all  \^;^T',;\-;[;  .'^^.^^^  j^^t  other  purposes 
and  transact  other  business  coUat    a  t>;^.^^^«-  ,^^  ^^^^  ,,,  ,hall 

and  powers  shall  ^^/^^^^^^^^^^^  or,  if  necessary 
;rS,^r;he  li;;rSpo.e-fore.aid  may  be  restncted 

and  reduced. 


Reprkskntativi:  Trusts 


19 


(7,)  \\  anv  time  hereafter,  when  it  may  seem  advisable  to  the 
trustees  h.-.'in  provided  for.  similar  corporations  may  be  formed 
in  other  States  and  Territories. 

(4)  I"ach  of  said  corporations  >hall  be  known  as  the  Standard 

Qil  j^-,,   ,,,- (and  here  shall  follow  the  name  of  the  State 

or  Territory  by  virtue  of  the  laws  of  which  said  corporation  is 

organized).  .  ,    n  1     r      1 

(5)  The  capital  stock  of  each  of  said  corporations  shall  be  fixed 
at  such  an  amount  as  may  seem  necessary  and  advisable  t.i  the 
parties  organizing  the  same,  in  view  of  the  purpose  to  be  accom- 
plished. .  ,  .  .    11  I 

(6)  The  shares  of  stock  of  each  of  said  corporatK^ns  shall  be 
issued  only  for  money,  property,  or  assets  equal  ai  a  fair  valuation 
to  the  par  value  of  the  stock  delivered  therefor. 

(7)  All  of  the  propertv,  real  and  personal,  assets,  and  business 
of  each  and  all  of  the  corporati<Mis  and  limited  partnerships  men- 
tioned or  embraced  in  class  (i)  shall  be  transferred  to  and  vested 
in  the  said  several  Standard  Oil  companies.    All  of  the  property, 
assct>^   and  business  in  or  of  each  particular  State  shall  be  trans- 
ferred' to  and  vested  in  the  Standard  Oil  Co.  of  that  particular 
State,  and  in  order  to  accomplish  such  purpose  the  directors  and 
managers  of  each  and  all  of  the  several  corporations  and  limited 
partnerships  m  ..tioned  in  class  first  are  hereby  authorized  and 
directed  l,y  the  stockholders  and  members  thereof  (all  of  them  be- 
ing parties  to  this  agreement)  to  sell,  assign,  transfer,  convey,  and 
make  o\cm  fur  the  consideration  hereinafter  mentioned,  to  the 
Standard  Oil  Co.  or  euuipanies  of  the  proper  State  or  States,  as 
soon  as  said  corporations  are  organized  and  ready  to  receive  the 
same,  all  the  propertv,  real  and  personal,  assets,  and  business  of 
said  corporations  and'  limited  partnerships.     Correct  schedules  of 
such  prnpertv,  assets,  and  business  shall  accompany  each  transfer. 

(S)  The  individuals  embraced  in  class  second  of  this  agreement 
do  each  for  himself  agree,  for  the  consideration  hereinafter  men- 
tioned, to  sell,  assign,  transfer,  convey,  and  set  over  all  the  property, 
real  anil  personal,  assets,  and  business  mentioned  and  embraced 
in  schedules  accompanving  such  sale  and  transfer  to  the  Standard 
Oil  Company  or  Companies  of  the  proper  State  or  Slates,  as  soon 
as  the  said  corporations  are  organized  and  ready  to  receive  the 

same. 

(q)  The  parties  embraced  in  class  third  of  this  agreement  do 
covenant  and  agree  to  assign  and  transfer  all  of  the  stock  held  by 


20 


Industrial  Comiunations  and   Trl-sts 


them  in  the  corporations  or  limited  partnersiui.s  luixm  named. 
to  the  trustees  herein  provided  .\)r.  lor  the  consideration  and  upon 
the  terms  hereinafter  set  forth.  It  is  under>tood  and  a^-reed  that 
the  said  trustees  and  their  successors  may  herealter  take-  the  as- 
signment of  sloci<s  in  the  same  or  similar  companies  ujion  the  tcrrns 
herein  provided,  and  that  whenever  and  as  often  as  all  the  stocks 
of  any  corporation  and  limited  partnership  are  vested  in  said  trust- 
ees the  i)roper  steps  may  then  be  taken  to  have  all  the  money, 
,>ropertv,  real  and  personal,  of  sai<l  corporation  or  partnership 
assisned  and  conveyed  to  the  Standard  Oil  Company  of  the  proper 
State  on  the  terms  and  in  the  mode  herein  set  forth,  in  whic  ii  event 
the  trustees  shall  receive  stocks  of  the  Standard  Oil  Company  criual 
to  the  value  of  the  money,  property,  and  business  assif^ned,  tobc 
held  in  place  of  the  stocks  of  the  company  or  companies  assiRninfi 

such  proiKTty.  ^    , 

(10)  The  consideration  for  the  transfer  and  conveyance  of  the 
monev,  propertv,  and  business  aforesaid  to  each  or  any  of  the 
Standard  Oil  Companies  shall  be  stock  of  the  respective  Standard 
Oil  Company  to  which  said  transfer  or  conveyance  is  made,  equa 
-It  par  value  to  the  ai)praised  value  of  the  money,  property,  and 
liusiness  so  transferred.  Said  stock  shall  be  delivered  to  the  trustees 
hereinafter  provided  for,  and  their  successors,  and  no  stock  ot  any 
of  said  companies  >hall  ever  be  issued  except  for  money,  property, 
or  business  ec;ual  at  least  to  the  par  value  ol  the  stock  so  issued, 
nor  shall  any  stock  be  issued  by  any  of  said  companies  for  any 
purpose  except  to  the  trustees  herein  provided  for.  to  be  held  sub- 
ject to  the  trusts  hereinafter  speciiied.  It  is  understood,  however, 
that  this  provision  is  not  inli  nded  to  restrict  the  purchase,  sale, 
and  exchange  of  property  of  said  Standard  Oil  Companies  as  fully 
as  they  may  be  authorized  to  do  by  their  r>spective  charters, 
provided  only  that    no  stork  l.e  issued  therefor  except  to   .said 

trustees. 

(ii)  The  con-ideralioii  tnr  aii>  smck  delivered  to  saul  trustees 
as  above  provided  for.  as  well  as  for  stocks  delivered  to  said  trustees 
bv  persons  mentioned  or  included  in  class  third  of  this  agreement, 
shall  be  the  delivery  by  said  trustees,  to  the  persons  entitleil  thereto, 
of  trust  certificates  hereinafter  provided  for,  equal  at  par  value 
to  the  par  value  of  the  stocks  of  th»-  said  Standard  Oil  companies 
s.)  received  by  said  trustees,  and  equal  to  the  appraised  value  of  the 
stocks  of  other  companies  or  partnerships  delivered  to  said  trustees. 
(The  said  appraised  value  shall  be  determined  in  a  manner  agreed 


Representative  Trusts 


21 


-£ 

-i 
* 


upon  by  the  parties  in  interest  and  said  trustees.)  It  is  under- 
stood and  agreed,  however,  that  the  said  trustees  may,  with  any 
trust  funds  in  tneir  hands,  in  addition  to  the  mode  above  provided, 
purchase  Uie  bonds  and  stocks  of  other  companies  enRaRed  ir! 
Ijusiness  similar  or  collateral  to  the  business  of  said  Stanflard  Oil 
companies,  on  such  terms  and  in  such  mode  as  they  may  deem  ad- 
visaijle,  and  siiall  hold  the  same  for  the  benelit  o'f  the  owners  )f 
said  trust  certificates,  and  may  sell,  assign,  traiisfer,  and  pledge 
such  bonds  and  stocks  whenever  they  niav  deem  it  advantageous 
to  said  trust  so  to  do. 

HI.  The  trusts  upon  which  said  stocks  shall  b  ■  held,  and  the 
number,  jjowers,  and  duties  of  .said  trustees,  shall  be  as  follows: 

(i)  The  number  of  trustees  shall  be  nine. 

(:)  J.  I).  Rockefeller,  O.  H.  Pa\  iie.  and  Wm.  Rockefeller  are 
hereby  api)ointed  trustees,  to  hold  their  office  until  the  first  Wed- 
nesday of  April,  A.  D.  1.S85. 

i,^}  J.  A.  Bostwick.  H.  M.  Flagler,  and  \V.  G.  Warden  are  hereby 
appointed  trustees,  to  hold  their  office  until  the  first  Wednesday 
of  Ai>ril,  A.  D.  1SS4. 

(4)  Chas.  Pratt,  Benj.  Brewster,  and  John  I).  Archbold,  are 
hereby  api)ointed  trustees,  to  hold  their  otrice  until  the  first  Wed- 
nesday of  April.  A.  D.  i.SS:?. 

(,S>  Klections  for  trustees  to  succeed  tlio-c  herein  appointed  shall 
l)e  held  annually,  at  which  election  a  sufficient  number  of  trustees 
shall  be  elected  to  t"ill  all  vacancies  occurring  either  from  expiration 
of  the  term  of  office  of  trustee  or  from  any  other  cause.  All  trustees 
shall  be  elc-cted  to  hold  their  office  for'three  years,  except  those 
elected  to  fill  a  vacancy  arising  from  anv  cause  except  expiration 
of  term,  who  shall  be  elected  for  the  balance  of  the  term  of  the 
trustee  whose  i)lace  they  are  elected  to  fill.  Kverv  trustee  shall 
hold  his  office  until  his  successor  is  elected. 

(())  Trustees  .shall  be  elect*  il  by  ballot  by  the  owners  of  trust 
rertilicates  or  their  proxies.  At  ail  meetings  the  owners  of  trust 
certilicates  who  may  be  registered  as  such  on  the  books  of  the 
tru>tees  may  vote  in  person  c  by  proxy,  and  shall  have  one  vote 
for  each  and  every  share  of  trust  certificates  stan<ling  in  their 
n  lines;  but  no  such  owner  shall  be  entitled  to  vote  upon  any  share 
v>hich  has  not  stood  in  h-,  name  thirtv  davs  prior  to  the  day  ap- 
pointed for  the  electio'..  The  transfer  books  may  be  closed  for 
thiriy  days  immediately  preceding  the  annual  election.  A  major- 
•"■  -I  the  shares  represented  at  sm!i  election  shall  elect. 


itv 


22 


I.NULSTKIAI.    CoMlilNATIoNS   AND   TrLSTS 


(7)  The  annvuil  meeting  of  the  owners  of  saul  ^r^st  cerliUcalt. 
for  the  election  ol  trustees  un<l  lor  other  business  shall  be  held  at 
the  ofFice  of  the  trustees  in  the  city  of  New  \ork  on  th.'  iir>    Wed- 
nesday of  April  of  each  vear,  unless  the  place  of  meeting  be  changed 
1)V  the  tracer.-,  and  said  meeting  may  be  adjourned  from  day  to 
day  until  its  bu>iness  is  completed.    Special  meetuiRS  of  the  owntTS 
of^said  trust  certif.cates  may  be  called  by  ^^e  n.ajor.ty  o    the 
trustees  at    ach  times  and  places  as  they  may  api)omt.    U  >lall  al^o 
be  the  duty  of  the  trustees  to  call  a  special  meetmj;  ol  holders  o 
trust  certificates  whenever  re<iue>ted  to  do  so  by  a  petition  signed 
bv  the  holders  of  lo  per  cent  in  value  of  such  certiticates.      I  he 
buMuc^s  of  such  special  meetinj^'s  shall  be  conlined  to  the  object 
specified  in  the  notice  given  therefor.    Notice  of  the  time  and  place 
of  all  meetings  of  the  owners  of  trust  certiticates  shall  begnen  by 
personal  notice  as  far  as  possible  an.l  bv  pubhc  notice  m  one  o 
Ihe  principal  newspapers  in  each  State  in  which  a  Standar. Oil 
Co  exists  at  least  ten  days  before  such  meeting.    .\t  any  meeting 
r  majority  in  the  value  of  'the  holders  of  trust  certiticates  represented 
consenting  thereto,  by-laws  may  be  made,  amendedor  repealed 
relative  to  the  mode  of  election  of  trustees  and  other  buMiiess 
of  the  holders  of  trust  certificates;  provided,  however,  that  said  hy- 
laws  shall  be  in  conformity  with  this  agreement.    Hy-laws  may  also 
be  made,  amende.l,  and  repealed  at.  any  meeting,  by  and  with 
the  consent  of  a  majority  in  value  of  the  holdersof  trust  certiticates 
which  alter  this  agreement  relative  to  the  number,  powers,  and 
duties  of  the  trustees  and  t..  other  matters  tending  to  the  more  elh- 
cient  accompli>hmcnt  of  the  objects  for  which  thetru^t  is  created, 
provided  only  that  the  e^^ential  intents  and  purposes  oi  this  agree- 
ment be  not 'thereby  changed.  .      ,     ,         ,     r  ,       . 

'S)  Whenever  a  vacancy  occurs  in  the  board  of  trustees_  more' 
than  sixty  days  prior  to  the  annual  meeting  for  the  election  of 
trustees,  it  shall  be  the  dutv  of  the  remaining  trustees  to  call  a 
meeting  of  the  owners  of  the  Standard  Oil  i'rust  certiticates  for  the 
purpose  of  electing  a  trustee  or  trustees  to  fill  the  vacancy  or  vacan- 
cies If  my  vacancv  occurs  in  the  board  of  trustees,  from  any 
cause,  within  sixty  days  of  the  date  of  the  annual  meeting  for  the 
election  of  trustees,  the  vacancy  may  be  filled  l)y  a  majority  of  the 
remaining  trustees,  or,  at  tluir  option,  may  remain  vacant  until 
the  annual  eleilion. 

(q)  If,  for  any  reason,  at  any  time,  a  trustee  or  trustees  siiall  ,ie 
aiipointed  by  any  court  to  fill  any  vacancy  or  vacancies  m  said 


Ria-RIiSENTATIVK    TRUSTS 


23 


board  of  trustee?,  the  trustee  (  astees  so  appointed  shall  hold 
his  or  the  respective  office  or  offices  only  untH  a  successor  or  succes- 
sors shall  be  elected  in  the  manner  above  provided  for. 

(10)  Whenever  any  chancre  shall  occur  in  th.  l)oard  of  trustees, 
the  le^al  title  to  the  stock  and  other  property  iield  in  trust  shall 
pass  to  and  vest  in  the  successors  of  said  trustees  without  any  fo  mal 
transfer  thereof;  bu^  if  at  anv  time  such  formal  transfer 'sliall  be 
deemed  necessary  or  advi>a!)ie  it  ^hall  be  the  dutv  of  the  boaid 
of  trustees  to  obtain  the  same,  and  it  shall  be  the  duty  of  any  re- 
tiring trustee,  or  the  administrator  or  executor  of  any  deceased 
tru-^tee,  to  make  said  transfer. 

(11 )  The  trustees  shall  prq)are  certificate--,  which  shall  show  the 
interest  of  each  beneficiary  in  said  truM.  and  deliver  them  to  the 
IHTSons  i)ro[)erly  entitled  thereto.  Thev  shall  be  divided  into  shares 
of  the  par  value  of  Sioo  each,  and  shall'  be  known  as  "  Standard  Oil 

1  rust  c-ertihcates,"  and  shall  be  issued  subject  to  all  the  terms  and 
conditions  of  this  agreement.  The  trustees  shall  have  power  to 
a},'ree  uix>n  and  direct  the  form  and  contents  of  vaid  certificates 
and  the  mode  in  which  they  shall  be  signed,  attested,  and  trans- 
ferred. The  certificates  shall  contai  1  an  e\i)ress  stipulation  that 
the  holders  thereof  sh;il|  be  bound  by  the  terms  of  this  agreement 
and  by  the  by-laws  herein  provided  for. 

(12)  No  certificates  shall  be  issue<l  except  for  stocks  and  bonds 
held  in  trust,  as  herein  provided  for,  and  the  par  value  of  certilicates 
issued  by  said  trustees  shall  be  e(|ual  to  th-  par  value  of  the  stocks 
of  said  Stan.lard  Oil  Companies,  and  the  .praised  value  of  other 
bonds  and  stocks  held  in  trust.  The  various  bonds,  stocks  and 
moneys  held  under  >aid  trust  shall  be  held  for  all  parties  in  interest 
jointly,  and  the  trust  certificates  so  issued  shall  be  the  evidence 
of  the  interest  held  by  the  several  parties  in  this  trust.  No  dupli- 
cate certilicates  shall  be  issued  by  the  trustees  except  upon  sur- 
render of  the  orijiinal  certiticate 'or  certificates  for  cancellation 
orunonsati-tactory  i)roof  of  the  l-.^s  thereof,  at,,!  i,.  the  latter  case 
they  shall  re(|uire  a  sufficient  bond  ui  indemnity, 

(1,0  The  stocks  of  the  various  Stand.ird  Oil  ComiKinies  held 
in  trust  by  said  trustees  shall  not  ])e  sold,  a^si^ned,  or  transferred 
by  said  trustees,  or  by  the  beneficiaries,  or  by  both  combined, 
so  loni;  as  the  trust  endures.  The  stocks  and  bonds  of  other  cor- 
i)orations  juld  by  said  trustees  may  be  by  them  exchanged  or  sold 
and  the  proceeds  thereof  distributed  pro  r.ita  to  the  holders  of 
trust  certificate..,  or  said  proceeds  may  be  held  and  reinvested 


I 


-M 


iNDrSlKIAI.    (■ 


<ATIONS    A.NU     TkISTS 


by  said  trustees  for  the  purposes  and  uses  ol  the  trust;  provided 
however,  that  said  trustees  may  from  time  to  tune  a^MK^l  such 
shares  of  stock  of  said  Standard  Oil  Companies  as  may  be  necessary 
to  nualilv  anv  person  or  persons  chosen  or  to  be  chosen  as  directors 
and  o(Ticer>  o'f  anv  of  said  Standard  Oil  Companies. 

(.4)  It  -hall  1r'  the  duty  of  said  trustees  to  receive  and  saie-ly 
t„  ken  all  interest  and  dividends  declared  and  paid  upon  any  ol  the 
.aid  bon.is,  stocks,  and  m..neys  held  by  them  in  trust,  and  to  dis- 
tribute all  monevs  received  from  such  sources  or  from  sales  ot  trust 
pronertv  or  otherwise  by  declarin-  and  paying  dividends^up..n  the 
Siaiulard  Trust  certificates  as  funds  accumulate,  which  in  their 
judgment  are  not  needid  for  the  uses  and  expenses  of  said  trust. 
The  trustees  shall,  howexer,  keep  separate  accounts  and  receipts 
from  interest  and  divi.lends,  and  of  receipts  from  sales  or  translers 
of  tru-^t  piopertv,  and  in  makin-  any  distribution  o    trust    unds, 
in  which  pionev's  derived  from  sales  or  transfers  shall  be  included, 
shall  render  the  holders  of  tru.t  certificates  a  statement  showing 
what  amount  of  the  fund  distributed  has  been  derived  trom  such 
sales  or  transfers.    The  said  trustees  may  be  also  authorized  and 
cmiK.wered  bv  a  vote  of  a  majority  in  value  of  h.ilders  of  trust 
certificates,  whenever  stocks  or  bonds  have  accumulate.!  in  then- 
hands  from  money  purchases  thereof,  or  the  stocks  or  bonds  held 
bv  them  have  increased  in  value,  or  stock  dividends  shall  have  been 
decliri'd  bv  anv  oi  the  companies  whose  stocks  are  held  by  sa.d 
trustees,  or  whenever  from  anv  such  cause  it  is  deemed  advisable 
so  to  do,  to  increase  the  amount  of  trust  certificates  to  the  extent 
of  such  increase  or  accumulation  of  values  and  to  divide  tlie  same 
amoni'  the  iiersons  then  owning  trust  certificates  pro  rata. 

(is)  It  -hail  be  the  dutv  of  said  trustees  to  exercise  general 
supervision  over  the  atTairs  of  said  several  Standard  Oil  Com] tames, 
an.l  as  far  as  practicable  over  the  other  companies  or  partnerships. 
any  portion  of  whose  slock  is  held  in  said  trust.  It  shall  be  tluir 
duty  a-  stockholders  of  sai.l  companies  to  elect  as  directors  and 
officers  thereof  faithful  and  competent  n'.eii.  'I'hey  may  elect  them- 
selves to  such  positions  when  they  sec  fit  so  to  do,  and  shall  en- 
dea\or  to  have  the  affairs  of  said  comiwnics  managed  and  directed 
in  the  manner  they  may  deem  most  conducive  to  the  best  interests 
of  the  holders  of  said  trust  certificates. 

(lb)  .All  the  powers  of  the  trustees  may  be  exercised  by  a  major- 
itv  of  their  number.  They  mav  ai^point  from  their  own  number  an 
executive  and  other  com'mittJes.     A  majority  of  each  committee 


I 


Klil'RKSEXTATIVK    TRUSTS  j^ 

^hail  oxcrciseall  the  !.,)\ver>  wr.i.  h  ihf  iru>lccs  may  confer  upon  -urh 
comniiltoo. 

(17)  'Ihc  trustees  may  eni])loy  and  pay  .ill  su(  h  a.iients  and  at- 
torneys as  they  may  deem  necessary  in  the  mana-^ement  of  -aid 
trust. 

(i.S)  Kach  trustee  shall  he  entitled  to  a  -alarv  for  hi-  services 
not  exccediiif;  twenty-five  thousand  dollar-  per  aiinum,  except  the 
president  of  the  I)oard,  who  may  be  v.'tetl  a  salary  not  exceeding 
thirty  thousand  dollars  jjcr  annum,  which  sai.irics  shall  be  fixed 
by  said  board  of  trustees.  All  salaries  and  ex[u'nses  connected  with 
or  growin-  out  of  the  trust  shall  be  i)aid  bv  the  trustees  from  the 
trust  fund. 

_  (i())_  The  board  of  trustees  -hall  have  its  principal  otlice  in  the 
city  of  \ew  York,  unless  changed  by  \ote  of  the  trustees,  at  which 
ofiice.  or  in  some  place  of  safe  dei)osit  in  said  citv,  the  bond-  md 
stocl.s  shall  be  kept.  The  trustees  shall  have  jiower  to  luiopi  rules 
and  regulations  pertaining  to  the  meetings  of  the  board,  the  election 
t)f  officers,  and  the  management  of  the  tru>t. 

(20)  The  trustees  shall  render  at  each  annual  meeting  a  state- 
PH-nt  of  the  affairs  of  the  trust.  If  a  termination  of  the  trust  be 
agreed  upon,  as  hereinafter  pro\ided,  or  within  a  reasonalile  time 
Iirior  to  its  termination  by  lapse  of  time,  the  trustees  shall  furni-h 
to  the  holders  of  the  trust  certificates  a  true  and  perfect  inventory 
anil  appraisement  of  all  stt)cks  and  other  jiropertv  held  in  trust, 
and  a  statement  of  the  I'lnancial  alTair-  o."  the  various  companies 
whose  stocks  are  held  in  trust. 

(21)  The  trust  shall  continue  during  the  live-  of  th/  -urvivors 
and  sur\-ivor  of  the  tru-tees  in  this  agreement  named,  and  for 
iwenty-one  years  thereafter;  provided,  howex  er,  thai  if  at  any  time 
alter  tl-.e_expiration  of  ten  years  two-thirds  of  all  the  hold'ers  in 
va  ue.  orif  after  the  expiration  of  one  vear  (,o  i)er  cent  of  all  the 
h.iiders  m  value  of  trust  certificates  shall,  at  a  meeting  of  holders 
"t  trust  certilicates  called  for  that  imrposc,  vote  to  terminate  this 
iru-l  at  some  time  to  be  by  them  then  and  there  fixed,  the  said 
trust  shall  terminate  at  the  date  so  fixed.  If  the  holders  of  trust 
certiticates  shall  vote  to  terminate  the  trust  as  aforesaid,  they  may 
at  the  same  meeting,  or  at  a  sub.-e(|uent  meeting  called  for  that 
purpose,  decide  by  vote  of  two-thirds  in  value  of  their  number  the 
mode  111  which  the  affairs  of  the  trust  shal"  be  wound  up,  and 
vMiet her  the  trust  property  shall  be  distributed  or  wheth<  r  part, 
and  It  so,  what  part  shall  be  divided  and  \s  hat  |)art  sold,  and  whether 


26 


Industrial  Combinations  and  Trusts 


such  sales  shall  hv  public  or  private.  The  trustees,  who  shall  con- 
tinue to  hold  their  offices  for  that  purpose,  shall  make  the  dis- 
tribution in  the  mode  directed,  or,  if  no  mode  be  agreed  upon,  by 
two-thirds  in  value  as  afores;ud,  the  trustees  shall  make  distribution 
of  the  trust  propertv  according  to  law.  But  said  distribution, 
however  made,  and  whether  it  be  of  property,  or  values,  or  of  both 
shall  be  ju'^t  and  eciuiiable,  and  such  as  to  insure  to  each  owner  of 
a  trust  certificate  his  due  proportion  of  the  trust  property  or  the 
value  thereof.  .      . 

<'22)  If  the  trust  shall  be  terminated  by  the  expiration  of  the 
time  for  which  it  is  created,  the  distribution  of  the  trust  property 
shall  be  directed  and  made  in  the  mode  above  provided. 

(23)  This  agreenunt,  together  with  the  registry  of  certificates, 
books  of  accounts,  and  <nher  books  and  pajiers  connected  with  the 
business  of  said  trust,  shall  be  safely  kept  at  the  principal  office  of 
said  trustees. 

(Signatures.) 

SrrPLEMFNTAI.   AGRFKMF.NT 

Whereas  in  and  by  an  agreement  dated  January  2.  1882.  and 
known  as  the  Standard  Trust  agreement,  the  parties  thereto  did 
mutually  covenant  and  agree,  inter  alia,  as  follows,  to  wit:  That 
corporations  to  be  km.wn  as  Standard  Oil  CoiniKinies  .f  various 
States  should  be  formed,  and  that  all  of  the  property,  real  and  per- 
sonal, assets,  and  biisiness  of  each  and  al!  of  the  corporations  and 
limited  partner>hips  mentioned  or  embraced  in  class  first  of  said 
agreement  should  be  transferred  and  vested  in  the  said  several 
Standard  Oil  Companies;  that  all  of  the  property,  assets,  and  busi- 
ness in  or  of  each  particular  State  should  be  transferred  to  and 
vested  in  the  Standard  Oil  Comjiany  of  that  particular  State,  and 
the  directors  and  managers  of  each  and  all  of  the  several  corpora- 
tions and  associations  mentioned  in  class  tir-t  were  authorized 
and  directed  to  sell,  assign,  transfer,  and  convey,  and  make  over 
to  the  Standard  Oil  Company  or  Conii)anies  of  the  proper  State 
or  States,  as  soon  as  said  corporations  were  organized  and  ready 
to  receive  the  same,  all  the  property,  real  and  personal,  a.ssets  and 
business  of  said  corpontions  or  associations;  and  whereas  itis  not 
deemed  cxiu'dient  that  all  of  the  companies  and  associations 
mentioned  should  transfer  their  property  to  the  said  Standard 
Oil  C()m|)anies  at  the  present  time,  and  in  case  of  some  companies 
and  a>sociations  it  may  never  be  deemed  ex-^edient  that  the  said 


Representative  Trusts 


27 


transfer  should  be  made,  and  said  companies  and  associations 
go  out  of  existence;  and  whereas  it  is  deemed  advisable  that  a  dis- 
cretionary power  should  be  vested  in  the  trustees  as  to  when  such 
transfer  or  transfers  should  take  place,  if  at  all:  Now,  it  is  hereby 
mutually  agreed  jjetween  the  [larlies  to  ihe  said  trust  agreement, 
and  as  suj)j)lementary  thereto,  tha*  the  trustees  named  in  the 
said  agreement  and  their  successors  shall  have  the  power  and 
authority  to  decide  what  companies  shall  convey  their  i)roperty 
as  in  said  agreement  contemplated,  and  when  the  said  sales  and 
transfer.-,  ^hall  take  place,  if  at  all,  and  until  said  trustees  shall  so 
decide,  each  of  said  companies  shall  remain  in  existence,  and  retain 
Us  property  and  business,  and  the  trustees  shall  hold  the  stocks 
thereof  in  trust,  as  in  said  agreement  Drovided.  In  the  exercise 
of  said  discretion  the  trustees  shall  act  by  a  majority  of  their  num- 
ber as  provided  in  said  trust  agreement.  All  i)ortions  of  said  trust 
agreement  relating  to  this  subject  shall  be  considered  so  changed 
as  to  be  in  harmony  with  this  sup[)lemental  agreement. 

In  witness  whereof,  the  said  parties  have  subscribed  this  agree- 
ment this  4th  day  of  January,  1882. 

(Duly  signed  by  the  same  parties.) 

Exhibit  3 

DEED 

THE   SUGAR   REFINERIES  COMPANY  ' 

The  undersigned,  namely: 

Ilavemeyers  &  Polder,  The  I)cCastro2  and  Conner  Sugar  Re- 
luung  Company,  "  O.  Matthiessen  &  Wiechers'  Sugar  Refining 
Company,  Ilavenwycr  Sugar  Refining  Companv,  Brocjklyn  Sugar 
Reliiiing  Company,  the  firm  of  Dick  &  .Meyer,  the  firm  of  MoUer, 
Sierck  &  Company,  North  River  Sugar  Refining  Company,  the 
tirni  t)f  Oxnard  Brothers,  the  Standard  Sugar  Refinery,  the  Bay 
State  Sugar  Relinery,  the  Boston  Sugar  Refining  Company,  the 
Cnntintntal  Sugar  Relinery  and  the  Revere  Sugar  Refinery,  for 
tlu-  purpose  of  forming  the  board  hereinafter  provided  for  and  for 
other  purposes  hereinafter  set  forth,  enter  into  the  following  agree- 
ment: 

'Report  of  the  Senate  Committee  on  General  Law;  on  Investigation  Relative 
t')  Iriisls.     N.  V.  Sen.  Doc.  No.  50,  iSSH,  pp.  644-651. 
-'  I  lius  in  origiual     -Ed. 


s 


28 


LnU'JSTKIAL    (.  UMUlNAlIUNb    AND     IkLST^. 


Nam  I". 
The  board  luTein  proviJed  for  shall  be  deaynauJ  by  ihc  name 
of  The  Suifar  RelipLTies  Company. 


Ohji.cts 

The  objects  of  this  agreement  are: 

1.  T(;  promote  economy  of  administration  and  to  reduce  the 
cost  of  relininj^,  thus  enabling  the  price  of  sugar  to  be  kept  as  low- 
as  is  consistent  with  a  reasonaijle  profit. 

2.  To  give  to  each  refmery  the  IjcnelU  of  all  api>liana<  and  proc- 
esses known  or  used  by  the  olher>,  and  useful  to  improve  the 
Cjuality  and  diminish  the  cost  of  refined  sugar. 

^.  To  furnish  protection  against  unlawful  combinati>)ns  of  labor. 

4.  To  protect  against  inducements  to  lowir  liie  standard  ol 
retinetl  sugar. 

5.  Generally  to  promote  the  interests  of  the  jjartie^  hereto  in 
all  hiwfu'  and  suitable  ways. 

Bdakd 

The  parties  hereto  who  are  not  corporations  -hall  become  such 
before  this  deed  takes  elTect. 

Each  corporation  subscribing  lurelo  agrees  and  the  parties  hereto 
who  are  not  corjiorations  agree  as  to  the  corporations  which  they 
are  to  form,  that  all  the  shares  of  the  capital  stock  of  all  such  cor- 
porations shall  be  transferred  tt)  a  board  consisting  of  eleven  per- 
sons, which  may  be  increased  to  thirteen  l)y  vote  of  the  majority 
of  the  members  of  the  entire  board,  the  two  additional  members  to 
belong  res!)ectively  to  tlu-  fir-l  and  secoml  classes  hereinafter  pro- 
vide(i  for. 

Any  member  of  the  board  may  be  removed  by  vole  •>t  two- 
thirds  of  the  members  of  the  entire  board,  in  case  of  iiuap,icity  or 
neglect,  or  refusal  to  serve. 

Any  member  may  resign  by  tiling  written  notice  of  his  resig- 
nati(m  with  the  secretary  of  said  board. 

\'acancies  during  the  term  of  oflice  of  members  shall  be  tilled 
by  ajipointment,  by  vote  of  the  majority  of  the  memV)ers  of  the 
entire  board. 

.\  member  appointed  to  fill  a  vacancy  shall  hole'  ofTice  until 
the  expiration  of  the  term  of  the  member  in  whose  place  n     is 


Rki'Rkskxtativi:  Tkl-sis 


-^9 


righlj 


.pointed    which  „cw  appointee  shall  sucrecd  to  all  the 
'liit.fs  an<l  oh  ,;,ratio„s  of  his  predecessor  under  thi.  deed 

\acancies  by  expiration  ol  olFicc  shall  be  tilled  at  the  annn-.l 
meeting  ot  the  holclers  of  certilicates  herein  provide  Hor  or  at Tc-h 
other   imes  as  shall  be  presc.ibed  by  the  boird 
,    >uch  annual  meetings  shall  be  hehl  in  the  city  of  \ew  York 

!■' 1 1^  o?C,;;i  Ir'  ^"^^  ""^i^^  ^^^^"  •-  «■-"  tj  each  cmi,l^ 

.  'Idcr  of  record,  of  eyery  meetui-  ot  certificate  holders,  by  nnilin- 

'i'.c"  nd^-  TV'"^  '^'""■^^'''  "^^^'"-  ^  notice  of^her 
I.  cc  and  objects  of  such  mcetin-      Holders  of  certificates  sh'il 
o  c  accord.n,  to  the  number  of  shares  for  which  they  I  ol     ce  t?  - 
nates.    They  may  vote  by  proxy 

The  board  may  make  by-knvs.    All  arrangements  for  meetin^rs 
lections   and  all  details  not  herein  specifically  provided  for     ha  i 
HW.a.le  by  the  board.    A  member  of  the  board  may  act  by  n  ox 
.or  any  other  men.ber  wUh  like  etTecl  as  if  he  were  p'roent  .LlTct^- 

A  majority  of  the  members  of  the  board  shall  constitute  a  quorum 

r    h    tramacfon  o    business.     The  action  of  a  board  nSn^ 

a  .najonty  yole  of  .such  meeting,  shall  have  the  same  elTec    as 

the  unammoas  actum  of  the  board,  except  as  herein  o  herwise 

provided,  and  that  to  authorize  the  aj.propriation  of  money  bonds 

o  .hares,  .shall  rerjuire  the  assent  eitherwritten  or  e.xpressc  i  by  "it 

of]ke  W  or's;;*!  '^'"  ^'"^^'V'"""  ''-"i^'^  ^^e  time  that  he  holds 
l.ce,  buy  or  sell  sugar,  or  be  mter.Mc-.l  directly  ,)r  indirectly  in 
-  purchase  or  sale  of  sugar,  v  hether  lor  the  purpose  of  specula  i, 

n,  v'l  ,"■  *"'>'/'';''''^"^"  *^'  tl^'"^  l.royision,  he  may  be  re- 

moved as  a  member  <,f  the  board  ami  shall  be  li  ,ble  to  account 

vltnSir'rl;  ^'^"  '-^  '''''''"'  ''>■  '"-  ^"^  ^'-'  '''-^1  ''^ '•  T 
'<..<;  tjencht  of  the  certilicate  holders  ' 

;^re  LU'li-'^;^''''' t'  V'-"  /^  '"''"^  ^''^^'^  "'"^'^t  "f  "^^"^^^^^^  ^vho 
huiu>  ;"^^T^^'''  •"  ^he  properties  and  the  business  contem- 
a  e    I    ,s  hereby  agreed  that  oil  ■  numbers  of  the  board  sha     be 

vhch  t  ;;  '"  Vr^'r  ^'^'^^'^'^  ^"  ^^^-reements  and  transactions 
I  uh    he  several  boards  of  directors,  hereinafter  referred  to,  or 

Id  w  ith  '."'r-t''''''-"-"' '"  ''^'' ''"''  ^'-^^^'"^  ^'"^1 '"  '^^  ^^-mc  manner 
■'"d  Uilh  the  like  etlect.  as  if  they  were  not  members  of  the  board 

'  Thus  ia  the  original. —Ed. 


30 


Industrial  Combinations  and  Trusts 


The  said  Ixxinl  may  transfer,  from  time  to  time,  to  such  persons 
as  it  may  be  desired  to  constitute  trustees  or  directors  or  other 
officers  of  corporations,  so  many  of  the  shares  as  may  he  necessary 
for  that  i)urpose,  to  be  held  by  them  subject  to  the  provisions  of 
this  instrument,  such  transfers  may  be  executed  by  the  president 
and  treo-^'uer  of  the  board,  in  behalf  of  and  as  attorneys  of  the  board, 
for  that  purpose  and  to  be  retransferred  when  so  re([uested  by  the 
board. 

The  first  board  shall  consist  of  the  persons  hereinafter  mentioned. 
They  shall  hold  office  as  f(;llo\vs,  and  until  their  successors  shall  be 
elected: 

Members  of  the  First  Class. 

Harry  O.  Havemeyer,  F.  O.  Matthiessen,  Joh"  E.  Scarlcs,  Jr., 
Julius  A.  Stur:5berj^,  to  hold  office  seven  years. 

.\[ embers  of  the  Seeotul  Class. 
Theodore  A.  Havemeyer,  Joseph  H.  Thomas,  John  Jurgcnsen; 
Hector  C.  Havemeyer  withdrew  and  Mr.  Parsons  substituted,  to 
hold  office  live  years. 

}[(  mbers  of  the  Third  Class. 

Charles  H.  SentT,  William  Dick,  to  hold  office  three  years. 

At  the  expiration  of  the  terms  of  the  third  class,  and  of  each 
successive  class,  their  successors,  as  members  of  such  class,  shall 
be  elected  for  seven  years. 

Officers. 

The  board  shall  appoint  from  its  members  a  president,  vicc- 
presiilenl  and  treasurer,  and  it  shall  also  appoint  a  secretary,  who 
may  or  may  not  be  a  member  of  t^e  board.  The  board  may,  from 
time  to  time,  create  other  offices  and  appoint  the  persons  to  fill 
them.  It  may  ap])oint  committees.  It  shall  desii^nate  the  duties 
and  prescribe  the  powers  of  the  several  officers  and  committees. 

Plan. 

The  several  rorporations,  parties  to  this  agreement  shall  main- 
tain their  separate  organization,  and  each  shall  carry  on  and  con- 
duct its  own  business. 

The  capital  stock  of  each  corporation  shall  be  transferred  to  the 
board,  and  in  lieu  of  the  same,  rcrtiticatc;  not  exxirding  fifty  mil- 
lions of  dollar.^,  diviiied  into  five  hundred  thou.--and  shares,  each  of 


Represemaiive  Trusts  31 

one  hundred  dollars,  shall  be  issued  by  the  board  and  distributed 
as  hereuialter  provided.  u  ui^Lnuuiea 

The  certilicate  shall  be  in  the  following  form: 

Shares. 

Shares  One  Hundred  Dollars  Each. 
The  Sugar  Refineries  Company. 

This  is  to  certify  that  ^ is  entitled  to 

■  /j,;--'  ■  ■■:•;- ■.•   shares  of  the  Sugar  Refineries  Company 

This  cer  . hcate  is  issued  under  and  subject  to  the  provisions  of  a 
deed  da  ed  the  si.xteenth  day  of  August,  one  thousand  eight  hun- 
dred and  eighty-seven.  ^ 

The  shares  represented  by  this  certificate  are  transferable  by 
the  holder  and  his  {)ersonal  representatives  in  person  or  by  attorney 
upon  the  books  of  the  board,  and  not  otherwise,  and  onfy  upon  the 
surrender  of  this  certilicate.  ^     P^nm.. 

They  entitle  the  holder  to  the  rights  and  are  subject  to  the  pro- 
viMons  mentioned  in  the  deed.  ' 

■ihe  interest  of  the  holder  is  in  the  proportion  of  the  number 
of  shares  represented  by  this  certiticate  to  the  entire  number  o 
.hares  outstandn^g.    The  total  amount  represented  by  outstanding 
er  ihca  es,  and  the  terms  of  the  deed  may  be  changed  from  time 
tu  lime  by  a  majority  in  interest  as  therein  providecj 

In  witness  whereof  the  board  has  caused  this  certificate  to  be 
si^^ned  by  its  presi<lent  and  trea..urer,  and  the  seal  of 

IL-  -s.j       the  board  to  be  afTixed  hereto,  the day  of.  one 

thousand  eight  hundred  and  eighty 

an   ':t^;;IS  ;"r' .^olierd^y  assign.  tran.fer 

■,n,l  .,,„>  .'  '-'•"^"'^^'^'•.  'I'lti do  hereby  const  tute 

:       :'j'f'"'"t attorney,  irrevocable,  fo? 

.11  .  n  fhV;  Kn  V  'V  V  f  ■"^?'''  '""^  '^'''"''  '"  ^'■^"^^^•'"  '1^^'  ^^'J  shares 
"vil!!in  boan°  '^  '  ''"'^'"''  ""^^'"^  '^'  '^^^^''^^^^^  "'"  '^' 

the I'eiwT"''!'^  accepting  this  transfer  assents  to  the  terms  of 
from  u:i;t  Hme''  "  '''"  "■^^'""^'•'  ^^  ^^^'  ^^""^^  ^^^^  ^^^  'changed 

Witness  hand  and  seal  this dav  of 

one  thousand  eight  hundred  and  eighty.       "  "  ' 


32 


Industrial  C'omhinahons  and  1  rusts 


Title. 

The  shares  of  the  capital  stock  of  the  several  corporations  to  l)e 
tratislerrcd  to  the  board  as  herein  provided  shall  be  tran>l"erred  to 
the  names  of  the  members  of  the  board  as  trustees,  to  be  held  by 
them  and  by  their  successors  as  members  of  the  board  strictly  as 
joint  tenants. 

Hy  the  death,  resignation  or  removal  of  any  member  of  the  I)oar(! 
the  whole  title  shall  remain  in  t'^c  others.  All  members  ceasing 
to  be  such  shall  execute  such  instruments  as  may  be  necessarv,  if 
any,  to  keep  the  title  vested  in  the  persons  who  from  time  to  time 
shall  be  members  of  the  board. 

The  Board  shall  hold  the  stock  transfern  <1  to  it  with  all  the  rights 
and  powers  incident  to  slockhokkrs  in  thr  several  corporations 
and  subject  only  to  the  i)urposes  set  forth  in  this  deed. 

Division  of  Intkrhst. 

The  several  corporations  shall  be  entitled  to  the  shares  in  ihe 
following  proportions  of  the  fifty  million-^  of  dollars,  vi^.: 

Havcmcyer  &  I'Idcr. 

DeCastro  &  Di)nner  Sugar  KLfining  Company. 

F.  O.  Matthiessen  &  Weichers  Sugar  Refming  Company. 

The  Havemeyer  Sugar  Refining  Company. 

The  lirooklvn  Sugar  Refining  Company." 

Dick  &  Meyer. 

Moller,  Sierck  &  Company. 

Oxnard  Brothers. 

Xorlh  River  Sugar  Refining  Company. 

Standard  Sugar  Refinery. 

Boston  Sugar  Refining  Company. 

Bay  State  Sugar  Refiner}-. 

Continental  Sugar  Refinery. 

Re\ere  Sugar  Refinery. 

Each  refinery  and  the  cor{)oration  to  which  it  belongs  shall  be 
freed  from  liability  and  indebtedness  by  the  parties  interested  in 
it;  or  such  parties,  if  the  bo  ird  shall  approve,  may  provide  in  cash 
for  such  indebtedness  or  liability,  leaving  the  same  to  stand  at  the 
pleasure  of  the  board;  except  that  the  employe's  contracts  shown 
in  the  schedules  hereto  annexed,  and  the  contracts  with  HaNcmeyer 
and  Elder,  the  F.  O.  Matthiessen  and  Weichers  Sugar  Relimng 


tions  to  ])(.' 
isffrrcd  to 
:)C  hi'kl  Ijy 
strictly  us 

the  hoard 
;rs  ceasing 
•cessary.  if 
ne  h)  lime 

the  rij;hts 
rporutions 


res  in  ihe 


ny. 


s  shall  he 
.■rested  in 
le  in  cash 
nd  at  the 
:ts  shown 
i\'t'nu'\'ii' 
RelininL' 


( 


Rkpresentative  Trusts  33 

Company  and  the  Hay  State  Sugar  Refinery  pending  for  improve- 
ments and  enlargements,  shall  continue  as  liahilities. 

Annexed  hereto  are  schedules  in  general  terms  of  the  properties 
of  the  several  refmeries.  The  pro[)erties  are  guaranteed  to  cor- 
re.-poiid  with  ihe  schedules  hy  the  parties  interested  therein,  who 
are  to  make  good  any  dellciency.  On  the  comiilete  execution  of 
this  agreement  each  of  the  said  parties  shall  make  a  full  inventory 
of  the  property  not  embraced  in  such  schedules  and  useful  for  ihe 
conduct  of  the  business,  on  hand  or  contracted  for,  including  raw 
and  refined  sugars,  molasses,  sugars  in  process,  syrups,  bone  black, 
fuel  barrels,  packages,  charcoal  and  other  supplies,  and  such  in- 
ventory is  to  be  examined  and  the  articles  appraised  at  their  present 
<  ah  value  (except  as  to  sugar  and  molasses  to  arrive  which  are 
to  be  appraised  at  their  market  value  on  arrival)  by  a  committee 
of  five  persons  as  follows: 

Thcodpre  A.  Havemcyer,  F.  O.  Matthiessen,  Julius  A.  Sturs- 
Ijerg,  John  E.  Searles,  Jr.,  and  Joseph  B.  Thomas. 

The  value  of  such  property  as  fixed  by  four-fifths  of  the  ap- 
praisers shall  l)e  paid  for  in  cash  by  the  said  board  to  the  trea>urer 
of  each  corporalii)n. 

Bone  black  may  at  the  o])tion  of  the  board  be  paid  for  in  ca~h  or 
in  the  bonds  hereinafter  provided  for,  or  in  certificates  at  a  rate 
for  bonds  or  certificates  to  be  fixed  by  a  vote  of  a  majority  of  the 
members  of  the  entire  board. 

The  property  shall  remain  with  the  refinery  where  it  is,  to  be 
used  by  it,  except  as  such  refinery  shall  make  a  different  disposition 
of  it. 

In  consideration  of  the  transfers  of  their  stock  to  the  hoard  the 

said  board  >hall  also  jjay  to  Havemeyers  &  Elder  the  sum  of 

■-:  ■_ t'>  the  F.  O.  ^latthiessen  &  Weichers  Sugar 

Helming  Company,    he  sum  of and  to  the 

Hay  State  Sugar  Renning  Company  the  sum  of on 

account  of  payments  already  made  on  pending  contracts  for  im- 
provements and  enlargements. 

Additional  shares  to  the  amount  of  ^400,000,  less  fifteen  per 
cent,  to  be  left  with  the  board  as  hereinafter  provided,  shall  be  re- 
ceived by  Moller,  Sierck  k  Co..  for  iin]>ro\emcnts and  enlargements 
of  capacity  of  their  refinery  now  in  progress,  when  said  im[)rove- 
ments  are  completed,  and  the  increased  capacity  deiiion^lrated. 

Tne  shares  assigneri  to  the  several  refineries  shall  he  distributed 
by  them  to  and  among  the  paities  interested  therein. 


K' 


34  iNDUsiRiAL  Combinations   vnu  Trusts 

Fnch  holder  of  stock  in  a  tcunery  company  .hall  he  entitled  to  so 
ma-n  of  the  'hares  allotted  to  such  refinery  as  shail  he  ,n  proportion 
of  his  stock  to  the  capital  of  his  company.  v   ,,  .,   , 

Z^:^  ^l^h^i^cc^r  ;S;u;e%ht  .o  recei.c  the  .ame  upon 
^'1)5X1;::.;'  dWuT!:;  ,he  .veral  refineries  they  .hall  leuve 

";  c^  ;^^^^  U  l."jeet  to  he  <li^po>e.l  of  hy  the  b-.ircl.  either 
^  he^  ^i  tion  ..f  other  renneries  to  h«ome  partie.  to  his  deed 
;™.i  for  additional  capacity,  or  by  appropriations  to  the  several 

'"bufht'no  ra.e  sh:  M  anv  ai-propnatinn  l,e  made  t.  or  any  action 
be  tat         V  a.v  corporaii.n  without  the  approval  o    Us  boaid  o 
dlrit '■.  an.l  no  aclion  >hall  be  taken  by  the  board  vvaich  shall 
create  liability  by  it  or  by  its  members. 

PkciI  11... 


board  for  car.ita!  -lock  a.  hereinbelore  provided. 


Fiscal  .\kkanoi  mi  nts. 

The  funds  necessarv  to  enabk  llie  said  boanl  to  make  the  pay  ■ 

ment   1  ere"  ,  p n  vid.  d  tn  b..  made  by  it,  may  be  ralse<  by  mortKa^e 

^b^m.Me  lly  th.  corpor^itions  or  either,  any  or  a^  o      jem  on 

their  pro,.erty.  and  hy  >uch  other  means  as  shall  be  sati^la.tor> 

"7rr'Je''anv  mort-'ace  ^hall  be  krd  on  the  pro,H-rty  of  any  cor- 
p,  t  S^,V  hs'lh'al^s  or  Mockholders  the  hoUlers  of  certdicates 
llnll  within  a  time  to  be  fixed  by  said  board,  haxe  thi  n<,lH  ai 
1  h  1  n  m  rates  as  said  board  shall  arranRe.  to  have  the  .ond>. 
c  tit  ca tes  or  other  evidence  of  debts  or  interest  m  pro,H>rt.on  to 
thdr  respective  holdings.  Any  par, ,  which  .hall  not  be  thus  taken 
nuiv  be  disposed  of  by  ^aid  board. 


Ki.I'KKSENTATIVE    IkusTS 


35 


Changes. 

The  nunihcr  nf  >]ian>>  and  tht-  total  amount  thcroof,  i,ssual)le 
by  said  hoard,  i;,uy.  Iroin  time  to  tiniu,  bu  increased  or  diminished 
by  deed  ex^'cuted  by  a  majority  in. value  of  the  certificate  holders. 

1  he  |.rovi-i,.n>  of  this  deed  may  from  time  to  time  I)e  changed 
by  deed  executed  by  not  less  than  a  majority  in  interest  of  the 
certilicati'  holders,  provided  no  change  >hall  be  made  vhich  shall 
discrmimate  to  the  disadvantage  of  the  certificate  holders  as  be- 
tween lhem:,el\es. 


.\<'QrisiTio\  nr  Other  Refint.ries. 
The  capital  -^tock  of  other  sugar  refining  companies  and  of  com- 
panies whose  business  relates  direttiv  or  indirectly  to  >ugar  rc- 
Iming  (m  every  in.-tance  to  be  incorpc. rated)  mav'be  transferred 
to  sai.l  boani  with  th-  consent  of  a  majority  thereof  at  valuations 
and  upon  terms  satisfactory  to  it  to  be  held  by  said  board  under 
and  subject  to  all  the  terms  ot  this  deed,  and 'certilicates  may  be 
issued  theremr  by  said  Ixxird  and  may  be  sold  by  it  to  provide  funds 
lor  such  i)urclKis  ■  or  purchases,  and  any  such  corporation  or  (or- 
poralioiis  shall  thereupon  become  a  p.irtv  to  this  deed  upon  cau.- 
mg  the  same  to  be  duly  signed  in  it.s  behalf. 

CiSToin  or  Dri:n. 
This  ,leed   -nIum  -Accuted  by  the  parti.'s  hereto,  shall  l^e  <lelix  ered 

to  t  he  president  (,f  1  he  board,  u  ho  shall  have  the  sole  and  in.lep.nd- 
«.  I  'ustody  an,!  contn.i  of  the  same,  and  the  said  ^V^viX  sh.dl  not 
he  shown  or  deliyeri'd  to  any  person  or  persons  whatsoever  except 
hy  the  express  direction  and  (.-der  of  the  board 

.\  copy  of  the  sai.l  deed  shall  be  lodged  with  a  member  of  the 
hoard  residing  in  Boston.  .Massachusetts,  which  shall  be  held  hv 
nmi  under  the  same  conditions  and  in  tin 
•■riginal  deed. 


-ame  maniu  r  .is  the 


Date. 


In  witness  whereof  the  j-arties  have  hereto  s<>t  their  seals 
and  alTixed  their  n;'mes,  thes.>  presents  t„  hecme  bind- 
ing wh.n  completely  execute.!  by  all  the  parties,  an.i  to 
lake  .tied  from  October  ist,  i«8y. 
August  i.'.th.  US87. 


(Signatures.) 


i 


36 


InDUSIKIAL   CuMJ'-NAlKiNS    A.NL>   TRUSTS 


Exhibit  4 
distillers'  and  (A  mm:  i  r.r.nr.Rs'  trvst  ' 

Wherca-;  it  is  designed  to  form  a  tru>t  to  l)e  known  as  the  Dis- 
tiller, and  Cattle  Feeders'  -I-rust,  for  '.'h'  purpose  of  secunn?  n_i- 
telliL'ent  co-operation  in  the  business  of  (li>tillin:r  sp.nls  Irom  gram 
or  other  material,  maltini;,  and  the  fee.lin-  ol  liv.-stock.  and  the 
sdi'  of  the  products  thereof  in  home  i:nd  lorei-n  markets,  and  t.)  .1., 
all  other  bu-ines>  incident;d  to  those  enumerated:   I  herein  .•, 

It  i^  mutuallv  a-reed  kv  all  who  may  sign  this  agreement,  or 
iK'Come  at  any 'time  the  hnidrrs  of  tlie  certilicates  of  trust  herem 
iirovided  for,  as  follows:  ,  .       ■ 

First.  The  trust  henin  .  reated  sh.il'  he  vested  m  mne  trustees. 


Second  William  \.  llohart.  (Icon;.-  K.  Duckworth.  Lewis  H. 
Cl-een  iVter  |.  llemu-sv,  .Mirrd  He\is.  J,„rph  15.  Creenhut, 
Warren  11  C'iirning,  .\doiph  Worlner,  and  John  li.  Irancis  are 
hereby  ui)pointed  trustees  to  hold  their  olTice  until  the  1st  da>  u\ 
Mi'V   A  D.  iSSS,  or  until  tluir  successors  arc  elcctc'i  and  (|ualitird. 

'rii'ird.  'I'he  trustees  ^hall  prejiare  ccrMlicates  whi.h  sh.dl  show 
the  interest  of  each  beneliciarv  in  sai.l  t'ust.  and  d.,  liver  them  to 
thr  iKTSons  cnlilled  thereto.  The  certilicates  sh.dl  be  divided  into 
-Inn  s  ul  the  par  \alue  of  ?ioo  dollars  ^  each,  and  shall  be  known 
a,  '■•1-he  Distillers  and  Cattle  I-eedrrs'  I  rust  CiTtilicate^.  1  he 
trustees  sludl  h.ive  full  l-ower  to  agree  ui^on  and  direct  the  torm 
and  contents  of  said  cTtilicatrs  and  tlie  mode  in  which  they  sh, ,11 
he  cx.-cute.l.  attested,  and  trai.sii  rred.  Tl  r  certiticates  shall  con 
t  (in  an  exjircss  stiimlalion  tint  the  holdc--  OuTeof  shall  lu'  bound 
by  the  terms  of  this  agreement  and  by  the  bvd.iws  hertan  i.rovided 

for.  .  , 

Fourth    \o  nrtiticates  shall  be  issued  except  lor  st.  :k.  .is  lieri 
inaftcr  provided,  .md  the  V'.v  v.duc  of  the  certiticates  issued  shall 
repre.-t'iit  as  nearlv  as  possible  the  actual  cash  valu.   of  the  stock 
held  by  the  trustees  in  trust.      The  (crtiticates  shall  be  the  best 
evidence  of  the  .imount  of  interest  of  the  beneticiaries  in  the  trust. 
No  dui)li(  ate  shall  be  issued  by  the  trustees  excei)t  upon  surrender 
of  the  oi.Kiii.d  certiticate  and'  cancellation  of  the  same,  or  ui.oii 
satisfactory  pro(,f  of  the  loss  thereof,  and  the  giving  oi  a  satis- 
factory bond  of  indemnity. 
'  Huusi  RiiK)rt,  No.  4ifiS.  jolh  Congress,  jnd  Sets.,  pp.  57-61. 
2  Thus  in  original.— ^kl. 


Reprfskniaiivk   Trust.s 


3: 


\ 


Fitlh  Each  sulj>crit)(.'r  hereto  agrees  to  assi<^n  and  transfer 
aljsolutely  to  said  trustees  the  nunii)er  of  shares  of  cajntal  stoek 
of  the  [)articular  cori)orati(>n  or  enrporalions  indicated  in  article 
six  of  this  a;,Teement,  in  conr>ideralion  of  which  said  trustees  do 
hereby  a<2;ree  to  exec'Jte  and  deli\er  to  each  sul)scril)er  trust  certif- 
icates, as  above  specilied,  for  'he  number  of  ^hare^,  which  certifi- 
cates, at  the  par  value  thereof,  shall  represent  the  cash  value  of 
llu'  >tock  ^-o  delivered.  The  \alae  of  the  capital  of  any  cor])oration 
whii-e  stock  -^hall  be  a-si(riK'd  to  said  trustees  shall  be  I'lrst 
aLM'eed  upon  between  -aid  trustees  and  the  stockholders  will- 
iivj.  to  transfer  the  same,  ami  after  it  is  a.i^reed  updU  there 
shall  be  no  discriminatioii  in  tlu'  purcha>e  price  a>  between 
>tockhnid(.T>  of  the  -ai^ie  corporation  transferrini,'  their  shares  at 
the  same  time. 

Sixth.  Tliis  af,'reenuiit  shall  take  elTect  as  -non  as  those  holdinf.; 
a  majority  of  stfci;  in  the  followinjj;  cor])or.itiiins,  formed  or  to  Ije 
formed,  to  wit:  The  Storrs  Distillin;;  ('(impany  by  the  .Mill  Creek 
l)i>tillin,u'  C'om{)any;  Tlie  Maddux  Hobart  Conijianv  b\  .\latidux, 
lb  ban  &  Co.;  the  White  Mills  Distillin.L'  Company' Ity' George  K. 
Duckworth;  tlie  Great  Western  Distilling  Comjiany;  Monarch 
Distilling  Company;  Woolner  brothers'  Distilling  Company; 
I'eoria  Distilling  Company;  Birmingham  Distilling  Company  I'a' 
Chicago  Distilling  Company;  .Mi-,souri  Distilling  Comiiany  by 
Nbiund  ('it\  Di-tilling  Com])any.  ha\-e  transferred  the  san'ie  to 
said  tru-tee-  '{'hereafter  the  s.iid  trustees  and  their  succes.sors 
shall  h;i\e  power  to  purchase  othir  stocks  of  tl  e  same  companies 
or  of  (ompanies  organized  for  conducing  the  same  business,  or 
any  ol  the  bu-inesscs  lit  reinbefore  spetiiied.  and  niav  issue  thert- 
|or  (crtilicates  of  trust  e(|ual  at  |)ar  value  to  the  ■•  ;isli  v.due  of  the 
stocks  so  purchaseil,  or  shall  have  jjower  to  le.ise  the  premises  of 
such  companies,  i)aying  therefor  sik  h  rental  ;is  tluv  may  deem 
I>r.;)(r,  whenever,  in  their  judgment,  it  i  >  for  the  be-t  interests  of 
the  tru-t  to  lease  rather  than  i)un  liase. 

."seMiith.  .\11  stocks  sold  and  transferred  to  said  trusties  dull 
be  hi  Id  by  them  and  their  successors  for  the  bem  fit  of  ail  the  own- 
ers of  said  trust  certiticates.  No  stocks  so  held  by  said  trustees 
shall  be  sold  or  surrendered  by  said  trustees,  during  the  contin- 
uance of  this  trust,  without  the  consent  of  a  maiorilv.  in  number 
and  value,  of  the  holders  of  trust  (crtificates:  J'nn'idal,  luncnrr. 
That  said  trustees  may  from  time  to  time  assign  such  shares  of 
stock  as  may  be  necessary  to  (|u;ilify  any  person  v-r  persons  chosen 


iNUUSTKI.M.    C'u-MIUNATIOXS   AND   TkUSTS 


or  desired  to  be  chosen  as  directors  of  any  companies,  the  >locks  ol 
which  are  held  by  said  trustees. 

Fi"hth  That  said  trustees  >hall  have  jxiwer  to  cause  cor^iora- 
tions'to  Ix'  f-.rmed  l..r  tlie  purposes  and  with  ail  or  any  of  the  powers 
M)ecil"ied  in  section  i  of  this  a-reenient:  Pnnukd,  Ihat  the  stock 
of  such  corporations  shall  be  issued  for  cash  or  for  property  ;  t  its 
cash  value,  and  shall  be  issued  to  or  be  purchased  by  said  trustees 
in  the  manner  provided  in  section  6  of  this  aKreeinent. 

Ninth    Said  trustees  shall  receive  and  sately  keep  all  moneys 
received  from  dividends  or  interest  upon  stocks  or  moneys  held  in 
tru-t   and  ^hall  di^tribute  the  same,  as  well  as  all  moneys  received 
from' sales  of  tru>l  pr<.perlv,  by  declaring  anu  paymg  monthly 
dividends  upon  said  trust  cerlilicates  as  funds  accumulate  which 
are  not  needed  for  the  uses  and  expenses  of  the  Tru^l.     1  he  trusiees 
shall    however,  keep  separate  accounts  of  receipts  Ironi  divKiends 
and  interest,  and  of  receipts  from  sale=  of  trust  proi^rty,  and  m 
declarin"  anv  dividend  in  which  moneys  derived  from  sales  oi  tru-l 
proiKTty  arJ  included  >hall  render  the  holders  of  tru>t  certilicales 
a  statement  showing  what  amount  of  the  fund  distribut-   ,  was  de- 
rived from  such  sales  or  tran>fer.->.  ,      ,    .,         c.      ,       ♦•f 
Tenth    The  tru-^lees  shall  render  t,)  the  h(jlders  of  trust  certil- 
icales at  each  annual  meeting  a  statement  of  the  receipt^  ..nd  dis- 
bursements of  the  tru^t  for  the  year.     They  shall,  al^o,  whenever 
demanded  by  a  majoritv  in  value  of  the  holders  of  trust  eertilicates. 
furnish    a  true  and   perfect    inventory  and  api)raisemenl   uf    all 
proiicrtv  held  in  trust,  and  a  statement  as  full  a^  pos.,l)le  o    the 
linancial  atlairs  of  the  various  companies  who..e  slock-^  are  lieUl  in 

trust.  .  .  (.  ,    . 

Eleventh.  Said  trustees  shall  exerei^e  sui.ervision,  so  tar  as  ineir 
ownership  of  stocks  enables  th.'m  to  do,  over  the  several  corpora- 
tions or  associations  whoM-  slock  i^  held  l)y  said  trustees.  As 
stockholders  of  said  eorpor.ilions  they  -hall  elect,  or  endeavor  to 
i-l.il  honest  and  competent  men  a>  director,  and  oOicers  thereof, 
who  shall  be  iiaid  a  ri'asonable  (ompensation  for  their  ^iTvice> 
Thcv  may  elect  themselves  as  such  <lir.  ( tor-  and  olhcers,  and  shall 
endeavor  to  secure  such  judicious  aiu!  elhcient  nian;v^emenl  of 
such  corporations  a>  >hall  be  most  conducive  of  the  interests  of  the 
holders  of  trust  icrtiticates.  . 

Twelfth.  None  of  the  powers  ul  the  trustees  can  be  exerc-ed 
(AMPi  by  unanimous  vole  of  their  full  number  either  m  petsoti 
or  bv  |>ro.\y.  except  in  the  election  of  oHuers  a>  i.rovided  in  the 


Rei'kesemativk  Trusts  3,^ 

by-l:nv<:  Provided,  Thai  nc  proxy  to  rcprc-cnl  a  trustee  can  l)c 
Riven  to  or  bo  voted  by  any  person  other  than  a  tru>lee;  and  in  ca^e 
01  .'  disagreement  among  the  trustees  upon  any  matter,  a  major- 
it}  ot  such  trustees  may  call  a  special  nuvtin-  of  the  hol.lers  of 
certihcates  as  herein  provided  for,  to  whom  .hall  he  submitted  the 
matter  ol  disagreement,  and  a  decision  of  a  niajoritv  in  value  <.f  the 
holders  of  trust  certil.cates  present  in  person  or  bv  proxy,  shall  be 
inal,  or  such  matter  ol  disagreement  may  be  submitted  at  any  regu- 
lar meet  imr  The  whole  or  any  part  of  the  foregoing  provi.'Ln 
c-f  tins  article  may  be  modified  by  any  by-law  now  or  hereafter 
adopted  by  the  certificate  holders.  The  said  trustees  may  ar)point 
from  their  own  number  an  executive  committee,  and  mav  appoint 
other  committees  composed  wholly  or  partly  of  persons  not  of  the 
boaril  of  tru^-tees,  and  delegate  to  such  committees  such  of  their 
Iiowers  as  they  may  deem  advisable.  \  majority  of  each  committee 
may  exercise  all  the  jwwcrs  conferred  upon  such  committee 

ihirteenth.  The  trustees  may  employ  and  pay  all  such  agents 
and  attorneys  as  they  may  find  it  necessary  to  employ  in  the  man- 
agement ol  said  trust. 

Fourteenth.  Kach  trustee  shall  he  entitled  to  a  salar\  for  his 
services  of  Sio  per  day:  Provided.  lumcirr,  That  such  salary  may 
be  increased  !)y  a  majority  of  the  certificate  holders  at  any  regu- 
lar or  special  meetmg.  All  salaries  and  expenses  connected  with 
andgro\Mng  out  ot,  the  execution  of  the  trust,  shall  be  tiaid  by  the 
tru-tees  from  the  trust  fund. 

Fifteenth.  The  board  of  trustees  shall  have  its  principal  office 
in  the  city  of  Chicago,  sui)ject  to  change  by  a  vote  of  the  trustees 
at  which  otiice,  or  in  a  place  of  safe  deposit  ,'diacent  thereto,  the 
stocks  held  in  trust  shall  be  ke!)t. 

Sixteenth  All  p,,wers  and  duties  vested  in  the  trustees  herein 
named  shall  ve.t  in.  and  be  exercised  by,  the  success<;rs  of  sai<l 
trustees,  appointed  .is  herein  jjrescribid. 

Seventeenth.  Klcctions  for  trustees  to  succeed  those  herein  ap- 
pointed sha  be  held  annu.illy.  At  the  first  annual  election  three 
rustet-s  shal  be  elected  t..  hold  their  offic^  for  one  year,  three  to 
hold  their  olhce  for  two  y.-ars,  and  three  to  hold  their  ofTice  f,,r 
hrce  yi-ars;  thereafter  three  trustees  shall  be  elected  annually 
to  take  the  place  of  those  retiring,  to  hold  their  otVuv  for  three  years 
except  those  elected  to  fill  a  vacancy  arisini;  from  anv  cause  except 
expiration  ,.1  i.rm,  ,  h,.  shall  be  elected  for  the  balance  ol  the 
term  of  the  trustee,  whose  placc-  they  are  elected  to  fill.      Kvery 


40 


INDUSIKIAI.    CuillilNAT10N>    AND     iRrSTS 


tru.  I'c   ^hall   hold   hi.,  office  until  his  successor  is  clcctc-d   and 
(lUidififd. 

Eighteenth.  Xo  person  -h;dl  he  eh'.^ihle  to  the  oftice  ot  trustee 
unless  he  shall  at  the  time  ol  hi-  election  t)e  the  actual  owner  of  at 
least  five  hundred  shares  ol  Iru-l  eertilkatis.  which  shall  stand  in 
his  name  on  the  luH.ks  of  trie  tru>t,  and  which  certificates,  or  an 
amount  of  not  less  than  five  hundred  shares,  he  shall  continue  to 
be  the  actual  owner  of  durin,t:  his  icrm  of  service,  and  the  owner- 
>hip  >hown  as  ahove  ])rovided. 

Nineteenth.  Tru-tees  shall  he  elected  l)y  ballot  by  the  owners 
of  trust  cerlilkates  or  their  proxic:^.  At  all  meeting's  the  owners 
of  tru^t  certit'icates  who  shall  be  reu'i^tered  as  such  on  the  books 
of  the  trustees  may  M)te  in  i)er>on  or  by  proxy,  and  shall  have  one 
vote  for  each  and  every  share  of  trust  certit'icates  slandinj.^  in  their 
names;  but  no  such  owner  >hall  be  entitkd  to  vole  upon  any  share 
which  "has  not  stood  in  his  name  thirty  days  prior  to  the  day  ap- 
pointed for  the  election.  The  transfer  books  shall  be  closed  for 
thirty  davs  immediately  i^recetling  the  annual  election.  A  major- 
ity of  the' shares  reprer-inled  at  such  elections  shall  elect. 

'Twenlielh.  The  annual  meeting  of  the  owners  of  said  trust 
certil"icates.  for  tlie  election  of  trustees  and  for  oth-r  business,  sIkiII 
be  held  at  the  office  of  the  trustees  on  the  \Ve<lnesday  nearest  the 
15th  dav  of  .\;)ril.  of  each  year,  and  said  meetings  may  be  adjourned 
from  d:iv  to  t'hiv  until  its' business  is  comiileted.  Special  meetings 
of  the  owners  u{  trust  certificates  may  be  called  by  a  majority  of 
the  trustees  at  such  times  and  places  as  they  may  ajipoint.  It_ 
shall  .il-o  bt'  the  .luty  of  the  trustees  to  call  a  special  meeting  of 
the  holders  of  trust  uTtilu.ites  whenever  rei|uested  so  to  do  by  a 
petition  signed  bv  the  hoUKrs  .if  v^;  i  s  pi"  ^'*'i'-  '"  ''•''"^"  *'f  such 
certit'icates.  The'business  of  such  special  meetings  shallbe  confinerl 
t(i  the  obiects  sp^cilied  in  the  notice  given  thert'for.  Votice  of  the 
time  and'iilace  of  all  meeting-  of  tlu'  owners  nf  tru,-t  certit'icates 
shall  be  given  by  mailing  a  notice  to  the  address  of  each  ctTtiticate 
holder,  so  t'ar  as' known,  at  le.ist  ten  days  before  such  meeting. 

Twcnty-tirst.  At  any  meeting  by-laws  may  be  mad( ,  amended, 
and  repealed  by  not  le'-s  th.in  two-thirds  in  value  of  the  holders  of 
trust  certit'icates:  Proxidrd,  lioirnrr.  That  said  by-laws  shall  be  in 
conformitv  with  this  agreement.  Hy-laws  may  be  abo  adojitid  by 
the  trustees:  J'nniilol,  lio:.;,rr.  that  said  by-laws  shall  not  be  in- 
consistent with  any  by-laws  which  hi\f  bei  n  or  may  be  aiiopttd 
bv  the  holders  of  tr'u.l'certiticates,  nor  with  tlii-  tru-l  ;igreement. 


i    \ 


RKI'KliSK.NTATIXi:    TRUSTS 


41 


Twenty-second.  Whenever  a  vacancy  occurs  in  the  hoard  of 
trustees  Irum  any  cause  other  than  the  expiration  of  the  term  of 
othci-,  the  remauiin.t;  tru..tecs  may  appoint  a  trustee  to  till  the 
vacancy  until  the  next  annual  meeting',  or  at  th,;ir  oi)lion  may  call 
a  meetm;,'  of  the  owners  of  trust  certilicates  for  the  purpose  of 
electui.L,'  a  tru>tee  to  1:11  the  vacancy  or  vacancies. 

Twenty-third.  If,  for  any  reason,  at  any  time,  a  tru-^tec  or 
trustees  shall  he  appointed  Ijy  any  court  to  fill  a  vacancv  or  va- 
cancies, the  trustee  or  tru>tees  so  appointed  shall  hold  his'or  their 
ollice  or  ofiices  only  until  his  or  their  successor  or  successors  shall 
be  appointed  or  tlreled  in  the  manner  above  provided  for 

Twenty-f<,urlli.  It  shall  be  obli-ratorv  upon  all  trustees'to  attend 
each  and  every  mrrim,;.'  .,|  the  board  of  trustees,  either  in  person 
or  by  proxy,  and  m  the  e\ent  of  anv  trustee  absenting;  himself 
from  thnr  sucressi%e  meetings  or  failing  to  be  reprcscntedln"  proxy 
at  such  meetm;;s,  then,  in  such  case,  the  office  held  bv  such'trustee 
shall  be  cunMdtiTd  vacant,  and  the  vacancv  be  filled  as  hereinhe- 
tore  i)rovitled. 

Twi'iity-tlfth.  Whenever  anv  chanqc  shall  occur  in  the  board  .>f 
tru-lees  the  k-a!  title  to  the  -lock  and  other  property  held  in 
t^l^t  shjl!  pa-.,  to  and  vest  in  the  successor.^  of  said  trustees 
without  any  tormal  transfer  thereof.  Hut  formal  transfer  '^hall 
l>e  made,  and  it  shall  be  the  dutv  of  the  board  of  trustees  to 
obtain  the  same,  and  it  shall  ]),■  the  dutv  of  anv  retinn^  trustee 
or  the  executor  or  administrator  of  anv  deceased"  tnit.e  to  make 
sui  11  tran.>ter. 

■I'winty-sixth.  The  trust   shall   continue   for  twentv-five  vears 
tn.ni  this  date  and  .shall  thereafter  continue  until  terniinated'bv  a 
N.'lr  ol  06  2',^  iKT  cent,  in  value  of  tlie  holders  of  certificates  at    i 
meeting  called  lor  that  juirpuse.     After  00  :   ^  per  cent,  in  v.ilue 
nl  the  holders  ol  trust  certifuates  shall  vote  to  t,  rminate  th.-  trust 
as  aforesaid    they  m,.y  at   the  s.ime  meetin-,  or  at  a  subsequent 
meeting  called  l,>r  that  purp(,>e.  decide  bv  a  vote  of  ,-i  per  cent 
<«l  their  number  the  mode  in  which  the  altairs  of  (he  trust  si,  ,11  he 
woundup  and  whether  the  trust  shall  be  distributed.  ..r  whether  it 
shall  he  sol,l  and  th<'  value  there.,f  distributed,  ..r  whether  part    and 
It  so   what  part,  ^h.d!  be  .livided  and  what  part  .hall  be  .ohl,' and 
whether  such  sales  >hall  be  public  or  private.     The  Iru.stees,  who 
shall  continue  to  h.^ld  their  ntfices  for  that  purpose,  -ha!!  wind  up 
he  attairs  of  the  trust  in  the  mode  agreed  upon  by  the  holders  of 
trust  certilicates  as  aforesaid. 


42 


LnDUSTKL\L   COMBlNATlONb   AND     iKLSTS 


No.- 


Form  of  trust  certificate. 
Shares  of  Sioo  each. 


shares. 


DISTILLERS  AND  CATTLE  FEEDERS'    TRUST. 


is  entitled  to 


This  is  to  ccrtifv  that 

shares  in  the  equity  t..  the  property  held  l)y  the  trustees  of  the 
Distillers  and  Cattle  Feeders'  Trust,  transleral)le  only  on  the  books 
of  '^aid  trustees  on  surrender  of  this  certificate.  'I  his  certilicate 
is  issued  upon  condition  that  the  holder  or  any  transferee  thereof 
shall  be  subject  to  all  ih.e  provisions  of  the  agreement  creating  said 
trust   and  b'v  the  by-laws  adopted  in  pursuance  of  said  agreement 

as  fully  as  if' ■' had  signed  the  said  trust  agreement. 

'    \Vitne:.s  the  hands  of  the  president,  secretary,  anil  treasurer 
board  of  trustees,  this day  of  , 


of  the  — 

A.  D.   iSS 


at  the 


-,  President. 
-,  Treasurer. 
-,  Secretary. 


[Hack] 


For  value  received 


hereby  sell  and  transfer  to 


shares  of  the  Distillers  and  Cattle  Feeders' 
Trust,  standing  in  my  name  on  the  books  of  said  trust.    .\nd  -       — 

hereby  irrevocably  aVl'-'int attorney  to  make  the 

necessary  transfer  upon  the  books  of  said  trust  in  accordance  with 
the  regulations  thereof,  and  upon  the  conditions  expressed  upon  the 
face  of  this  certihcate. 

Dated ,  1S8-. 

In  presence  of    ■ 

(Here  follow-  list  of  sij;nalures.) 


CHAPTER  III 
LEGISLATIVE  OPPOSITION  TO  THE  TRUST 

NOTE 

TirE  clc\-eIopmcnt  of  the  Trust  type  of  combination  aroused  a 
storm  of  o[)pusition.     This  was  scarcely  remarkable.     The  power 
intangibility  and  secrecy  of  the  or<;anization,  its  extra-Je^al  char- 
acter and  Its  lack  of  amenabiHty  to  law  all  ran  counter  to  American 
ideas  ol   justice  ami   leo;ality.     The  oppositiim   rapidly  gathered 
stren^'th.     I  nder  the  pressure  of  public  sentiment  both  the  Re- 
inibhcan   and   Democratic    parties— allhoush    it   was   recognized 
that  the  campai.i^m  would  be  fouf^ht  out  on  the  tarifT  issue— in- 
serted Anti-Trust  planks  in  their  resi)ective  Presidential  ph^tforms 
in  the  conventions  of  iSSS.    Thi,^  action  later  bore  fruit  in  tne  pas- 
sage of  the  Sherman  Anti-Trust  Act  of  kS(;o.     In  the  meantime 
the  State  Legislatures  had  not  been  idle.     The  latter  eighties  and 
early  nineties  witnessed  a  flood  of  State  Anti-Trust  legislation  which 
swept  the  entire  country.     Kansas.  Nebraska,  Maine,  Michigan 
Aorth  Carolina,   Iowa,   Kentucky  and  Illinois  were  conspicuous 
leaders  in  the  movement.     By  1804,  the  statute  books  of  about 
twenty  States  showed  legislation  of  one  kind  (»r  another  looking 
toward  the  supi)ression  of  Trusts,  Pools  and  other  combinations 
1  he  exhibits  in  this  chapter  have  been  intended  merely  to  give  an 
idea  of  this  legislation.  — Kd. 


Exhibit  1 
the  sherman  axti-tkist  i.  \\v  * 

An  act  to  protect  traiJe  and  commerce  against  unlawful  restraint.s 
and  monopolies. 

Be  it  enacted  by  the  Senate  and  House  of  Represoitathes  of  the 
united  States  of  America  in  Cnm^res^  assembled, 

4.5 


44 


IXUrSTRlAl.    ("OMIUNAIH.NS    AM)    TRrSTS 


Sf.c.  I.  Every  contnict,  combination  in  ihc  iwm  ui  trust  (^r 
otherwise,  or  conspiracy,  in  restraint  of  trade  or  a-.":  .erce  amon^ 
the  several  States,  or  with  foreij,'n  nations,  is  lierehy  ileclarc*!  to  be 
illegal.  Every  person  who  shall  make  any  such  contract « -r  en^aj^e  in 
any  such  combination  <  .r  conspiracy,  shall  be  deemed  <.nulty  ol"  a  mis- 
demeanor, and,  on  conviction  thereof,  shall  be  punished  by  Ime  not 
exceeding-  five  thousand  dollars,  or  by  imprisonment  not  exceeding 
one  year,  or  bv  both  said  punishments,  in  the  discretion  of  the  court. 

Six.  2.  Every  person  who  shall  monopoH/e,  or  .ittt:i,pt  to  nioti- 
opoli/e,  or  combine  or  conspire  with  any  otiur  per.MiU  or  persons,  to 
monopolize  any  part  of  the  trade  or  commerce  among  the  several 
States, or  with  foreium  nations, shall  be  deemetl  guilty  ol  a  misdemea- 
nor and  onconvidion  thereof,  shall  be  punished  by  tine  not  exceed- 
ing Vive  thousand  dollars,  or  by  imjirisonment  not  exceeding  one 
year,  or  by  both  said  punishments,  in  the  di.-cretion  ol  the  court. 

Sec.  3. 'Every  contract,  combination  in  form  of  trust  or  other- 
wise or  cons]  iracy,  in  restraint  of  trade  or  commerce  in  any  1  er- 
ritorv  of  the  t.'nited  States  or  of  the  District  of  Columbia,  or  in 
restraint  of  trade  or  commerce  between  any  such  'I  erritor>-  and 
another,  or  between  anv  such  Territory  or  Territories  and  any  State 
or  States  or  the  District  of  rolumbla,  or  with  foreign  nations, 
or  between  the  District  of  Columbia  and  any  State  or  States  or 
foreign  nations,  .<  hereby  declared  ilU  gal.  Every  person  v  ho  shall 
make  any  such  contract  or  engage  in  any  such  combination  or 
conspiracy,  shall  De  deemed  guilty  of  a  misdemeanor,  and.  on  con- 
viction thereof,  shall  be  ininished  by  tine  not  exceeding  live  thou- 
sand dollars,  or  by  impriMinment  not  exceeding  one  year,  or  by  both 
said  punishments,  in  the  discretion  of  the  court. 

Si:c.  4.  The  several  circuit  courts  of  the  United  States  are  hen  by 
invested  with  juris  liction  to  prevent  and  restrain  violations  ol 
this  act;  and  it  shall  be  the  duty  of  the  several  district  attorneys 
of  the  United  States,  in  their  respective  di>tricts,  under  the  di- 
rection of  the  Attorney-General,  to  institute  proceedings  in  equity 
to  iirevent  and  restrain  such  violations.  Such  proceedings^ may  be- 
by  way  of  petition  setting  forth  the  case  and  praying  that  such 
violation  shall  be  enjoined  or  otherwise  prohibited.  Whenthe 
parties  complained  of  siiall  have  been  duly  notified  of  such  petition 
the  court  shall  proceed,  as  soon  as  may  be,  to  the  hearing  and  (le- 
termiiiati..n  of  the  rase;  ind  pending  such  petition  and  iK-tore  tmal 
decree,  the  court  mav  at  anv  time  make  such  temporary  restrain- 
ing order  or  proliibition  as  shall  be  deemed  just  in  the  i)remi>es. 


Lf.gisi..\ti\k  Opposition   ro  the  Trust 


45 


Sec.  5.  Whenever  il  shall  appear  to  the  court  before  which  any 
proceeding  under  section  four  of  this  act  may  he  pending',  'hat  the 
ends  of  justice  rec|uire  that  otlier  parlies  should  be  brought  before 
the  court,  the  court  may  cause  them  to  be  summoned,  whether 
they  reside  in  the  district  in  which  the  court  is  held  or  not;  and 
subpa'uas  to  that  end  may  be  ,-erved  in  any  district  i)v  the  marshal 
thereof. 

Sec.  ().  Any  property  owned  under  any  contract  or  b\-  a.iy  com- 
l>ination,  or  pursuant  to  any  consjiiracy  (and  beinj^  the  .subject 
thereof)  mentioned  in  section  one  of  this  a'ct,  and  being  in  the  course 
of  transportation  from  one  State  to  another,  or  to  a  foreign  coun- 
try, shall  be  forfeited  to  the  United  States,  and  may  be  seized  and 
condemned  by  liki'  proceeding;-,  as  those  provided  by  law  for  the 
forfeiture,  seizure,  and  condemnation  of  projjerty  imported  into 
the  United  States  contrary  to  law. 

SKr.  7.  Any  person  who  shall  be  injured  in  his  business  or  prop- 
crtv  by  any  other  person  or  corporation  by  reason  of  anything  for- 


bidden or  declar'. 


i)    to 


je  ur.iawful  by  this  act,  may  sue  then 


in  any  circuit  court  of  the  United  States  in  the  district  in  which  the 
defendant  resides  or  is  found,  without  respect  to  the  amount  in 
controversy,  and  shall  recover  three  fold  the  damages  by  him  sus- 
tained, an(J  the  costs  of  suit,  including  a  reasonable  atto'rney's  fee. 
Si.c.  S.  That  the  word  "person,"  or  "persons,"  wherever  used 
\n  this  act  shall  be  deemed  to  inclucie  corjxjrations  and  associations 
existing  under  or  a;ilhori/ed  by  the  laws  of  either  the  United  States, 
or  the  laws  of  any  of  the  Territories,  the  laws  of  any  State,  or  the 
laws  of  any  foreign  country. 


r;--XiIIBIT   2 


KANSAS  '■ 

Be  it  enacted  hy  the  Lei^islalure  of  tlie  State  of  R-'nsas: 
Section  i.  That  ail  arrangements,  contracts,  agreements, 
trusts  or  coml)in;itions  between  jKTSons  or  corporations  made 
with  I  view  or  which  tend  to  jirevent  full  and  free  competition 
in  the  importation,  transportation  or  s;de  of  articles  im[)orted  into 
this  state  or  in  the  !)roduct,  m;inufacture  or  s.Je  of  articles  of 
domestic  growth  or  product  of  domestic  raw  material,  or  in  the 
loan  or  use  of  money,  or  to  \\\  attorneys'  or  doctors'  fees,  and  all 

'Stale  of  Kansas,  Session  Laws  ol  iSSq,  Chap.  CCLV'II,  pp.  389  il. 


46 


iNUUblRlAL    C'oMiUNAnONS    AM'    TkUSTS 


arranRfmcnls,  contract?.  a,!,'n.'cmcnts,  trusts  or  cunW^inations  hc- 
tweeii  pcr.-ons  or  corporations  (k-sij^'iicd  "r  whieli  tend  to  advance, 
reduce  or  control  the  price  or  tiie  co^t  to  the  produce  r  or  to  the  con- 
sumer of  any  such  products  or  artii  les,  .  .  ..  are  hereby  declared 
to  be  ai^ainst  public  iK)licv.  unlawful  and  void. 

Six.  2.  It  shall  noi  be  lawful  for  any  (orporation  to  issue  or  ♦() 
own  tru-t  certificates,  (jther  than  the  regular  and  lawfully  author- 
ized -tock  the  reof .  or  for  any  corporation,  a^'ent.  otTicer  or  employes, 
or  the  directors  or  stockholders  of  any  corporation,  to  enter  into 
any  combination,  contract  or  asfeenient  with  any  person  <.'-  !>er- 
sons,  corporation  or  corpc  rations,  or  with  any  stcKkholder  or  di- 
rector thereof,  the  purpose  and  effect  of  which  combination,  con- 
tract or  agreement,  shall  be  to  i)lace  the  management  or  control 
of  such  combiaation  or  combinations,  or  the  manufactured  product 
thereof,  in  the  hands  of  any  trustee  or  trustees,  with  the  intent  to 
limit  or  fix  the  price  or  lessen  the  production  and  sale  of  any  article 
oi  commerce,  u>e.  or  consumpt'(jn,  or  to  prevent,  restrict,  or  di- 
minish the  manufacture  or  output  of  any  such  article. 

Sec.  3.  That  all  persons  entering  into  any  such  arrangement, 
contract,  agreement,  trust,  (-r  combination,  or  who  shall,  alter  the 
passage  of  this  act,  attempt  to  carry  out  or  act  under  any  such  ar- 
rangement, contract,  agreement,  trust  or  combination  described  m 
sections  one  or  t".>  of  this  act,  either  on  his  own  account  or  as 
agent  or  attorney  lor  another,  or  as  an  officer,  agent  or  stockholder 
of  any  corporation,  or  as  a  trustee,  committee,  or  in  any  capacity 
whatever,  shall  be  guilty  of  a  misdemeamr.  and  on  conviction 
thereof  shall  be  subject  to' a  hue  of  not  less  than  one  hundr^'d  dollars 
and  not  more  than  one  thousand  dollars,  and  to  imi)risonment  not 
less  than  thirty  days  and  not  more  than  six  months,  or  to  both  such 
fine  and  imprisonment,  in  the  di^cretion  of  the  court. 

F.XHIPIT   ,5 


KINTUCKV 
(All  M(iy  20.  iSoo) 
POOLS     TRUSTS     CONSPIRACIES 

§  3015.  Defined  and  prohibited.      That  if  any  corporation  under 

the  laws  of  Kentucky,  or  uii'kr  the  laws  of  any  othc--  State  or 

'The  Kcntuikv  Slalulc:-.  1894,  Chai).  101,  So/i.  J9'5-30i'),  PP-  I2C)7-6S. 


Legislative  Opposition-  to  the  Trust 


47 


country,  for  transacting  or  conducting  anv  kind  of  business  in  this 
Slat'j,  or  any  partnershij),  comi)anv,  linn  or  individual,  or  other 
association  of  persons,  shall  citate,  establish,  organize  or  enter 
into,  or  become  a  member  of,  or  a  party  to,  or  in  anv  way  interested 
111  any  pool,  trust,  combine,  agreement,  confederation  or  under- 
standing with  any  other  corporation,  partner-hiii,  individual  or 
person  or  association  of  persons,  for  the  purix.se  of  regulating  or 
oniroliing  ,,r  Ii.xing  the  price  of  any  merchandise,  manufactured 
articles  or  property  of  any  kind,  or  .hall  enter  into,  become  a 
r;iem.;er  of,  or  party  to,  or  in  any  wav  interested  in  anv  pool 
agreement,  contract,  understanding,  combination  or  confedera- 
tion, having  for  its  object  the  hxing  or  in  any  wav  limiting  the 
amount  or  quantity  of  any  article  -f  property,  commodity  or 
merchandise  to  be  produced  or  manufactured,  mined,  bought  or 
sold  shall  be  deemed  guilty  of  the  ciirne  of  conspiracv.  and  t)un- 
ished  there, or  as  provided  in  the  subsequent  secli-.-.s  of  this  act 

§  50ib  Trust  certificates-when  sale  of  unlaw,  al.     It  shall  not 
be  lawtul  lor  any  corporation  to  i>,ue  or  t(,  own,  have  or  sell  anv 
trust  certificates  or  stocks,  or  for  anv  corporation's  agent,  otTict'r 
or  employe,  agent  or  director,  or  any  corporation  to  enter  into 
eitiier  verbally  or  in  writing,  anv  combinations,  contract    agree- 
ment or  understanding  wiih  any  person  or  i)ersons,  corporation 
or  corporations,  or  with  any  director,  agent  or  ofTicer  thereof   the 
purpose  or  eilLCt  of  which  combination,  contract,  agreement  or 
understanding  would  be  to  place  the  management,  control  or  any 
part  o*  the  business  of  such  combination  or  as^ociati  )n    or  the 
manufactured  product  thereof,  in  the  hands  or  uuder  che 'control 
m  the  whole  or  in  part,  of  anv  trustee  or  trustees  or  a<.ents    or 
any  person  whatever,  with  the  intent,  or  to  haxe  the  elU'ct'tc,  limit 
tix,  e^tabli>h  or  change  the  price  of  the  production  or  sale  of  any 
article' ol  property  or  of  commerce,  or  to  prevent,  restrict,  or  in  any 
way  (limim.h  the  manufacture  or  output  of  any  such  articl"  or 
property. 

5!3')i7-  Penalties  imposed  on  corporations  and  officers.     If 

any  corporation,  company,  firm,  partnership  or  person,  or  association 
o  persons,  shall,  by  court  of  competent  jurisdiction,  be  found  guilty 
ot  any  violatum  of  any  of  the  provisions  of  this  act,  '.urh  guilty 
party  shall  be  i)unishe(l  by  a  fine  of  not  less  than  fnv  hundred  dol- 
iar.-,,  and  not  more  than  tlve  thousand  dollars.  Any  president 
nian.-iger,  director  or  <.lher  officer  or  agent,  or  receiver  of  anv  cor- 
poratio--,  company,  lirni.  partner.-b.ip  (>r  anv  r-orporation,  company 


,11 


—ISr^ 


48 


Industrial  Combinations  amj  Trusts 


firm  or  association,  or  member  of  any  corporation  lirm  or  asso- 
ciation, or  any  member  (,f  any  company,  lirm  orother  association 
or  any  individual  found,  by  a  court  of  competent  jurisdiction.  KUjH) 
of  any  violation  of  thi.  act  shall  be  punished  by  a  line  o  no  less 
than  five  hundred  dollars  nor  niore  than  live  thousand  dnllars, 
or  may  be  imprisoned  in  the  county  jail  not  less  than  six  months 
-lor  more  than  twelve  months,  or  n.ay  be  both  so  nned  and  im- 
prisoned in  the  discretion  of  the  court  or  jurv  trying  ^he  case. 

S  u,iS  Contract  in  violation  of  law  void.  Any  contract  or 
aKreementorun.k-rsUuulin-in  viokiLion  of  theprovis,or,sof  thenre- 
cedins  sections  of  this  act  shall  be  null  an.l  void:  and  any  purcluisers 
of  propertv  or  article,  or  of  any  commndity.  from  any  individual, 
firm.  comi)any  or  corporation  transacting  businep  contrary  to 
the  preceding  sections  of  this  act.  shall  not  be  liatile  f..r  the  pr.ce 
or  payment  of  such  article  or  commodity  or  i.roptrty.  and  ma" 
plead  and  rely  on  this  act  as  a  comi<K  le  defense  to  any  suit  tor  such 

price  or  ixivment.  . 

8  :qi<)    Charter  of  corporation  forfeited  upon  conviction,     it 

any'corporatinn  created  or  organized  by  or  un.Kr  iIk  laws  of  this 

St;ite  shall  be  indicted  and  amvicted  f«)r  any  violation  ol  any_ot  the 

provisions  of  this  ;ict.  such  indictment,  tri.il  and  cnviction  in  any 

court  of  competent  jurisdiction  shall  haxr  the  eliecl  to  l.irteit  the 

charter  of  such  cnri)nration  without  any  further  jiroceedings  on  the 

subject  of  the  forfeiture    '"  its  charter;  but  any  t  .rporation  who-e 

charter  is  so  forfeited  shad  have  the  ri-rht  of  appeal  as  is  provuh  d 

in  other  cases,  and  the  tiling  of  the  bond  as  is  rcjuired  by  law  sli.ill 

suspend  the  judgment  .if  l..rfeiture  until  same  is  passed  upon  by 

the  court  to  which  the  t  asc  is  appealed. 


ExmniT  4 


Ml    lite.  \N 

Sr.rTlON  T.  The  I'roplr  of  llir  SLilr  of  M idtii^.ii:  r.-uut.  That  all 
((.ntracts.  agreement-.,  understandhigs  and  combinations  made, 
.iitcred  into.or  knowiiigh  assented  t...  by  ar.d  lict  .vcen  any  ii.irties 
.ai>able  of  m. iking  a  <(inlra(t  <>r  agutnunt  whidi  uould  be  valid 
at  law  or  in  t(|iuty.  tlu'  purpose  ,,r  ..l.jtit  or  intent  ..t  whah  sludl 

'  rulilic  .\cts  and  Joint  and  Concurrent  kcsoluli'-ns  of  the  L.K.slahjn-  (.1  ilic 
Si,it.  of  MMii^Mn,  i88g.  No.  J^S.  P- 33«  1- 


Lkgisi.ativi-:  Opi-osmox   m  iin:  TRisr  ^g 

l.e  to  limit,  cntroi.  .,r  in  any  manner  to  rotrict  or  n-ulatr  the 
aniount  nl  in'oduction  or  tlu-  quantity  .-l  any  article  or  commo.litv 
in  ijc  rai>e<l  or  pnu  uce.i  by  mi^in^^  maniifacture,  agriculture  oV 
any  olKT  branch  ol  bu>ine.s  or  lal.u.r.  or  ,„  enhance,  contml  c!r 
rcK^aui  e  the  market  i.ruv  there.,f,  -r  in  any  nianr.er  to  prevent  or 
re.tnct  free  cnmpetil>.,n  in  the  production  <.r  sale  of  anv  >uch  article 
or  commodity,  ^h.iil  be  utterly  illegal  and  void,  and  eu-rv  such 
contract,  apeement,   under^tandin,i,'  and   .-.^nJ-inatinn   <hail   om- 
.stitute  a  cnmmal  cn^vracy.     And  every  person  who,  fur  himself 
personally,  or  as  a  memlur  nr  in  the  name  .1  a  partner>hip,'ur  as 
a  member,  agent,  or  olhcer  of  a  corporation,  .,r  of  any  association 
fur  bu>  ne»  purpo.es  ot  any  kmd.  uh„  shall  enler  into  or  knou  in-dy 
>..nsent  to  any  -uch  vn:<l  and,  ilk^al  contr.ul.  ,,^reement    undtT- 
Manduig  or  combination,  ^hall  be  deenu..:  a  partv  to  such  conspir- 
a.>.     And  ail  part>e.  so  oliending  >hall.  on  conviction  thereof    be 
l>um^hc.d  by  f.neo    n.;t  le^s  than  hlty  dollar,  nor  m.,rc  th.in  thnv 

hundred  dollars,orbyni,pr,M,nmenl  in  thecouatvjail  not  more  than 
six  month,  or  by  b.,,1,  .„,!,  ime  and  impri.mment  at  the  .li" 
cption  ,,|  the  c.Hirt  And  the  pro-ccution  i,,r  olu.nsc  under  this 
section  may  be  instituted  and  the  trial  had  in  anv  countv  n  here 
.rn  ol  th,.  coni„r,,tor.  lurame  partie.  to  hu  h  cm.piracV.  or  in 
.  h  any  .,ne  „,  ,  „■  con.pir  'ors  >h::il  re^Lle:  J'roM,  ).n.r:rr, 
.  .  at  h  .  H.  l.,.n  -hall  ,n  no  niner  invalidate  or  alTect  contracts 
tor  uhat  i>  kn.nvn  an.i  recognixe.'  „t  CMn.m.,n  Inv  and  in  eouitv 
a-    ontracts  Inr  the  -. ]  will  .,!  a  lra,le  .,r  In,  ia. -..■•'!  udUh 

the  same  limitation.  recogm..d  a.t  c.,mm„n  law  and  in  equity 
.>x.   J    hyery  coiitract.   agreeme.u,   understan.Iing,  and'  rom- 

sh.dl  be  e-iually  void  and  illegal  within  thi.  Slate  V,  luth,T  nude  and 
fiUm-d  into  within  or  without  tlii..  Stale.  "i,  r  nuUc  an.l 

Sicr.  ,^  Th,'  carrying  int..  Hlect.  in  wl,,,!,.  ,,r  in  part    of  .,nv  -U(  h 

S  inrfi;:r"i-"''  -r'^'^^'""'""«  -•  -n!.iiia,i,.n " ,:;: 

iiontU  in  the  Jirst  section  ..t  this  act  and  everv  act   .vhich  -h  dl  be 
•one  for  that  purpose  by  any  of  the  parties  or  fhrou  h  th    r  ag  n  v- 
he  ag.nry  of  any  one  of  them,  shall  constitute  a  n.  .denS  n  r 
on  conviction  the  olTen.iers  shall  be  pu.iished  bv  fmpr  >  i         t 
■"  the  Male  prison  not  more  than  one  year,  or  in  thJ  cunt  v  jail  n 

mt-iil  11  the  discretion  of  the  a>urt.  " 


b"tll  Mich  fine 


imprison- 


so 


Industrial  Combinations  and  Trusts 


Exhibit  5 

novth  ca)-      ina 
An  act  to  prohibit  trusts  in  the  State  of  North  Carolina,  and 
to  provide  fo^r  the  punishment  of  persons  connected  with  them. 

The  Gnioal  .  1  vvw/'/v  vl  A  orll:  Carolina  </■'  <  >:a,.: 
S,    HON   1.  Thai  all  c.imlnnalions.n.l  '^^^'^  f  ^'''''f  ^^^ 
act  arJ  unlawlul.  an.l  clan,.r<,u^  to  ih.  lihcrty.nl  11.  people,  .nd  arc 
hcTehv  forhidden  to  he  formed  or  earned  on  m  thi>  ^tate. 

S,?  1  That  a  tru.t  i^  .:n  arrangement,  understanding:  or  agree- 
ment 'eiVher  priN-ale  .t  puhKc,  entered  int..  hy  two  or  more  person. 
""  ;, V^a^;:  for  the  -urpose.  of  increasing  or  r^uem.  he  pru^ 
,  f  the^h  ire.  of  stocl-  of  any  company  <-r  corporation.  01  ol  anv  class 
^^uU;  V  material-  or  manufactured  articles,  h.yond  ^.  l^r^ 
t  w,  "d  i>e  t^xed  hv  ,he  natural  den.md  U.  or  the  -PP  V  ;;^  -  h 
shm-  i.roduct..  materials  or  manutactured  articles,  and  an>  at 
tZiu!cL  out  ^uch  purp..e  shall  he  evidence  that  such  ar- 

^';;.m|;Mrca  ;  'o     .;:W^;'>V;;/tl^^  state.  .ha,l  ..  .ui.ty  <.  a 

;     :Eeanor.andup,lncon^iction_m^^ 

ten  thousand  dollar,  -r  may  he  imprisoned  not  nu.re  than  ten  >.ar> 

%H- ';'Tha^'  anv  ,h  r^on,  company  or  corporation      ho  enter 

into'm  arranj:ement,  utuler>tandin^  or  agreement    nm    to  rmne 

nu    c  ur.    huv.  -11  or  tran.,».rt  more  than  a  certain  s,h.(.  ie< 

mou!;; :;  aiiy , i-  pr..du.,.  or  -7-'^^'- -;,';;,;  ^;;]i'  ;^ 

time  ^^\\\  have  violated  section  three  of  this  act  and  ^u\\  Ik  liai  it 
;;"  KlI^;;  'ent  tlure...  ami  anv  person.  V-P'-^  -,  ^l^^l^'^^ 
who  L'iv.-  homl  or  make  a  forleit  of  any  Kun\  not  t.  hrcak  sm  n 
n^enut  understanding  .,r  a.reemen,  ^h  ill  l^e  ,u,lty  of  a  mis- 
Sanor.  and  on  convution  ,herc-of  sliall  he  iined  or  impris.Hu.l. 
„r  hoth    in  the  discretion  o!  the  court.  11,,, 

S         ;    That  anv   merchant,  l-n.ker,   manulacturer  <>r  dea le 
■  '  such  iKTsons,  svlio  shall 


iniawmalrrialsofanykin.l.orthe,i;;enl  ol 

ill, linns 
I' 


,  ,,,.  ,,n,.   K,.s„l.,.ions  ..f  the  St.tlc  ul    N>,.r.l,  Carolina,  .889,  Chap.  374, 
ihu.s  ill  orii;iiul.--Kii. 


Legislativic  Opposition  to  the  Trust 


sell  any  particular  class  of  jjoods,  raw  materials  or  manufactured 
articles  for  k>s  than  actual  cost  for  the  i)ur[)ose  of  breakiu'r  down 
comiR-titors.  shall  he  guilty  of  a  miMicmeanor,  and  upon  conviction 
may  he  lined  or  inipri.-oned.  or  hoth,  in  the  discretion  of  the  couit  • 
Provided,  that  nothinj,'  contained  in  tliis  act  shall  operate  or  he 
construed  so  as  to  forhid  or  prevent  anv  perxm  or  persons  who  de- 
sire and  intend  to  purchase  any  article  or  commoditv  for  his  or 
their  own  use  or  consumption,  from  comhinin-,'  or  oiKrwi-e  liw- 
fully  actin-  so  as  to  i)rotect  or  help  themselves  from  im[,o>iUon 
m  the  cost  or  purcha.-e  priie  of  such  articles  or  commodities  a.-. 
they  or  either  of  tluin  may  desi;,'n  and  intend  to  use  or  consume 

Sic.  (>.  That  this  act  shall  he  in  full  force  and  etTect  from  and 
after  the  lirst  day  of  May  of  the  year  one  thousand  eiizht  hundred 
andeif;hty-nine. 


chaitku  IV 

JUDICIAL   Al  lAC  R   UN    1HI:>  TRUST 
NOTE 

Even  before  the  passage  by  the  St.le  I  e^i.lature.  and  Congre.-, 
„f  the  mass  of  le,i'lali.>n  rHVrre.l  to  in  the  note  to  the  preced.n.. 
h     IcT  the  assault  upon  the  truM  lorin  -l  eoml>uiat.on  had  brn 
.:    n    h     u.h  the  juilleiai  arm  of  ,..v.rnnunt  und.r  ex,>tmg  lav. 
'  •  ;  hr't  ,un  of  the  attaek  wa>  f.red  by  the  State  ol  Louisiana  a^ain:.t 
,  !,     \merlean  Cotton  Oil  "rr.-t  early  in   1SS7.  ,n  an  attempt  to 
h:;ve  that  combina-inn  deeiared  an  illr.J  asM.e,at,nn,  s<.    ar  as  ks 
a  ions  in  the  State  of  Louisiana  v„  r.  e.ncern.d    ..ul  to  se      e 
the  liqui.iation  and  Nvin.lini^  up  ol    its  alia,r>.      I  h,.  prn.eedm. 
us        rtly  folknve<l  bv  a  suit  bn.uuht  b>;  the  Attorney    .en..ra. 
the  Statl  of  New  V.irk  afjain-t  th.  North  Riv.r  h  :,.r  Rel.nnv, 
Inipanv.  one  of  the  men.bers  of  the  Su,.r  R>  imerus  C  ompan.v. 
AlmcU  :imultaneouslv  therewith,  the  samr  tru4  was  a^a.  ed 
the  Su,H-rior  Court  of  California.    In  iS.,o  the  >ta te  ol  ()h>o  be.an 
an  act  on  against  the  Slamlanl  Oil  Company  ot  ()h,o   and  m  tlu^ 
s^ni^yer    Nebraska  brought  suit  ajrain^t  tin.  Nebraska  D.s  .  h,,, 
(■.,„,Lv  Nvhi.h  had  become  a  n-.ember  o.  the  I  h^  .Her.  an.    Ca^ 
,1,.    F.vd'rr-'  Trust.      Tinallv  in    iSqi.  a   lederal   Court    d.'chned 
,  ..MtiNrlv  to  prrvent  a  corporation  by  means  of  a;'  mjunetum  trom 
;„.lnin.'  .,  .ov.nant  made  bv  it  in  consideration  of  -.t-^  adm,-,o„ 
,„    i  ,:,:.,       In  order  to  make  absolul.ly  clear  tin   -jrounds  ui.on 
.viieh  theill.'^alitv  of  the  Tru-t  was  b.:M-d.  eM.rpt>  Iron,  some  ot 
these  decisio.H  have  inrn  -ivcn  in  the  loHowmg  pages.-Ld. 

Kxiiiuii   I 

STATE  EX  REI..  ATTORNEY  V.  STANDAK!)  Oil   roMPANV  ' 

MiNsiiMi     J.    'Ihree  questions  arise   upon   the   pkadint's:    i. 

Should  the  defendant.  The  Standard  Oi!  Company,  b    r.uard.d  as 

a  party  in  its  coriwrate  capanty.  to  the  ann.  mmt  .ousti;  .itmu  tae 

>  40  Ohio  Si.  IJ7;30^'-  ••••  -79- 

5» 


Jibu  lAi.  Attack  on  tiil    Trust 


53 


H 


a-' 


Standard  (JilTrust.  j.  Had  thecom[)any  [)()\vcr  toljccomca  party 
to  such  an  agreement.  ,;.  Jt'so,  is  tlu-  ri;,'iit  (if  iIk'  state  to  (kinand 
a  forfeiture  of  its  corporate  franchises,  or  of  the  piower  to  make 
and  i)erf()rni  sucli  ai^reenu  nts,  barred  liy  htpse  of  time. 

I.  It  will  he  observed  on  readinj^  the  answer,  that  while  tlie  de- 
fendant denies  that  it  "entered  into  or  become  a  party  to  either 
or  i)oth  of  the  agreements  in  said  jjctition  set  forth,"  and  also, 
"denies  that  it  ha>  at  any  time  dP  in  any  manner  acquiesced  in.  or 
obser\ed,  performed  or  carried  out  either  or  both  of  said  a,uree- 
ment'-."  it  does  not  deny  tlie  averment  of  the  petition,  that  "all 
of  the  owners  and  holders  of  its  cai)itai  stock,  including,'  ail  the 
ofTicer>  and  directors  of  said  company.  si,Lrned  said  a<jreiments." 
.\or  (.liuhi  it  have  l)een  the  intention  to  do  --o.  as  the  answer  j)ro- 
ceeds  toadmit,  "'that  it,"  the  corporation,  "i^  informed  and  belie\es 
that  the  individuals  named  in  the  a,i,'reenunt,  beinjj;  the  same  in- 
di\i(luals  who  executed"  it,  "did  enter  into  thi'  agreements  set 
torth"  in  the  petition-  chiiminf;  "that  said  agreements  were  ajiiee- 
nients  of  individuals  .11  their  indi\idual  capacity-  and  with  refer- 
ence to  their  indi\'idual  proi)erty.  and  were  not,  nor  were  th(\  de- 
s!j,'ned  to  be,  corporate  agreements."  '{"he  claim  i>  based  upon  the 
arjxument,  that  the  corporation  is  a  iejial  entit_\-  separate  from 
it>  stockholders,  that  in  it  are  vested  all  the  i)roperty  and  |)owers 
of  the  company,  and  can  only  be  alTecte<l  by  --uc  h  act:,  and  aj^ree- 
mentsasare  done  or  executed  on  its  behalf  by  ils  corjiorate  a;.;encies 
actinj;  within  tlie  leu'ilimate  -cope  of  their  powers.  'I'hat  its  stock- 
holders are  not  thei-orporation.  that  their  -hares  are  their  indi\-idual 
property,  and  that  they  may  each  and  all  dispo-e  of.  ,ind  n-ake  such 
a;:reements  alTectin.;^  their  shares,  as  best  -ult  their  pri\ate  in- 
lerols;  and  ih.it  no  -ui  h  act>  and  a;rreemenl<  of  -tockholders, 
-ub<ervienl  of  their  priv.ite  interests,  can  be  as(  ribed  to  the  com- 
p.iiiy  as  a  separate  entity,  though  done  and  concurred  in  by  each 
and  all  of  its  -tockholders. 


Xow,  so  loHR  as  a  proper  use  is  made  of  the  fiction,  that  a  cor- 
I)oralion  is  an  entity  apart  from  its  sliareholders.  it  is  harmless, 
and,  because  convenient,  houM  n()t  be  called  in  (juestion;  but 
y.here  it  is  urjj^ed  to  an  end  subversive  of  its  polic\ ,  or  such  is  the 
i-sue,  the  fiction  must  be  ignored,  and  the  (juestion  deternMned, 
whether  the  act  in  question,  though  done  by  shareholders,  that  is 
to  suy,  by  the  persons  united  in  one  bi-dy,  was  done  simply  as 


54  IxuusTRiAi.  Combinations  anu  Trusts 

individuals  and  .ilh  respect  to  their  individual  inten^st^as  share- 
holders or  was  done  otensihly  as  such,  hut,  a>  a  matter  oMaU, 
^omtmUhe  corporation  and  atlect  the  transaction  ol  ^^:^>^^^^' 
n  th  same  n.anner  as  if  the  act  had  been  clothed  -'  ^  -  J*^ 
formalities  of  a  corporate  act.  This  mu>t  be  so,  f'^^^^^^^^^ 
holder-  havin"  a  dual  cai)ucily,  and  capable  ot  act  n-  in  citnir, 
and  aV  tible  interest  to  conceal  their  character  .hen  actiiy,  m 
tSr  corporate  capacity,  the  absence  of  theformal  evidence  ol  the 
d  rate  of  the  act,  cannot  preclude  judicial  mquirv  on  the  sub- 
let ll"  k  were  other.  i>e  then,  in  one  department  ot  the  law,  fraud 
would  enjoy  an  immunity  awarded  te.  it  in  nc.  other. 

Therefore,  the  real  question  we  are  now  to  .''S^^'"™"^;  ^'  ;•  V  • 
it  appears  from  the  face  of  the  plead.nj^s  giving-  eflect  t,.  al  1  c 
den  N  <.f  fact  cmtained  in  the  an.w.r,  that  the  exec^ution  of  the 
.T  .'  nu.nt  .~et  f.,rlh  in  the  petition,  should  be  .mputcd  tu  the  asso- 
ci-ition  of  per.-o.,.  c>.r,.-tilutin«  The  Standard  Oil  Company  of 
Ohio   -irtinc'  in  tlieir  coritorate  capacity. 

n;   i^ment  proyicL  in  the  hr.t  place  that  the  parties  to  , 
shall  be  cliyided  into  thr.e  clashes,  llu.  lir^t  class  to  embrace  al 
the  stockholders  and  mci:d).rs  of  certain  cori)orat!ons  and  limited 
mrtner.hips.  the  defendant,  The  Standard  ().    Comi.any  of  Ohio, 
d,  "  one.      It  i^  the  n  covc^nantcd  by  the  parties,  that,  as  soon  as 
nr,ct'-cable  a  corporation  shall  be  formed  m  each  ot  certain  states, 
uider  tlie  laws  thereof,  Ohio  being  one.  to  mine  for,  produce,  manu- 
future    rclmc^  and  .K,d  in  iutroleum  and  all  it>  products;  with  the 
proviso,  however.  tlMt   in^tead  of  or-ani/m.i;  a  new_  corporation, 
•uiv  existing  one  "mav  be  u.e.i  for  the  purpose  when  it  can  advan- 
Uu'reously  ire  don.^,"  and  in  Ohio  the  defendant  has  been  so  usee  . 

In  a  sub.e.iucnt  iKirt  of  the  a-rcc-ment.  nine  trustees  are  sdeded, 
thdr  powers  and  ch.tic-s  are  defined,  ami  provision  made  for  the 
selection  of  their  succe:.>ois. 

\.  uill  hereafter  appear,  it  i-  made  th.'  duty  of  the>  parties  to  the 
a.-recnunt,  to  tmn-fer  their  slocks  or  interests  in  their  r- d)edive 
■;„,,,„,.  ..r  „rms  to  tlu^e  trusts,  who  hold  the  same  in  trust, 
;,,t  ',,i,i,  ,he  power  to  vote^  on  the  same  a>  thou,d.  the  re.,!  owners, 
in  eon.i.ieration  of  which,  trust  certificate^  are'  issued  to  the  owners, 
wlio,  as  the  owners  of  such  eerlificates,  elect  the  .successors  of  Ihv 

^XT\]un  providul  tliat  all  the  ,.rop.Tty,  a^.et-  and  business 
of  the  corporation-^  ami  iimifd  partner^hii.-^  ..nibracnl  m  I,.'  Urst 
dass  "-hall  he  tr.m-;.  rred  to  and  \e-ted  in  the  said  >everal  Stand- 


Judicial  Attack  on  thk  Tkist 


55 


;ircl  Oil  Companies."  And  in  order  to  accomplish  this  purpose, 
it  is  provided  that  "the  directors  and  mana^'ers  of  each  and  all 
<if  the  several  corporations  and  limited  i)artner>hips  mentioned  in 
class  tirst,  are  hereby  aulhorized  and  directed  ]>y  the  stockholders 
and  members  theriof  (a.ll  of  them  hcinj:;  parlies  to  this  agreement), 
to  sell,  assign,  transfer,  convey  and  make  over,  for  the  consideration 
hereinafter  mentioned,  to  the  Standard  Oil  Conipa.iy  or  companies, 
of  the  proper  state  or  states,  as  soon  as  said  ctjrporations  are  or- 
ganized and  ready  to  receive  the  same,  all  the  properly,  real  and 
jjersonal,  assets  and  business,  of  said  corporalic  ■  s  and  limited 
{)artnerships."' 

N'ow,  in  the  case  of  the  defendant,  it  will  be  observed,  that  this 
contemplated,  and  could  not  have  bcai  acconijili-hcd,  without 
corporate  action.  The  Standard  Oil  Comi)any  of  Ohio  was  re- 
quired to  transfer  all  its  f)roperty,  assets  and  business  to  a  new 
Company  to  l)e  organized  in  the  state;  and  this  was  to  Ije  aicom- 
pii>hed  by  the  obligation  imposed  on  its  members  and  stockholders, 
all  of  whom  are  parlies  to  the  agreement,  to  authorize  and  require 
t!ie  directors  and  managers  to  make  the  transfer.  The  property 
iiiid  assets  of  the  corporation  could  only  be  transferred  by  a  cor- 
porate act,  and  the  agreement  could  not  in  this  res]iect,  l)e  carried 
into  etTect.  other  than  by  such  corporate  act;  and  clearly  indicates 
that  the  jiurpoM'  of  the  stockholders  of  the  (k'fendant,  in  becoming 
a  party  to  it,  w;!s  to  affect  ihi  r  pro])erty  and  bu>iness  a>  a  corpora- 
tion; in  other  word^,  was  to  act  in  their  corj  .orate,  and  not  in  their 
individual,  capacity. 


Applying  then  the  princl[)le  that  a  coryioration  is  simjily  an 
association  of  natural  persons,  united  in  one  i)ody  under  a  special 
denonn'nation,  and  vested  by  tiie  policy  of  the  law  with  the  capacity 
ot  acting  in  several  respects  as  an  individual,  and  disregarding 
thr  mere  fiction  of  a  sejiarate  legal  entity,  since  to  regard  it  in 
.in  imiuiry  like  theone  t)efore  u^  would  be  subver-i\t'  of  the  jmrposc 
lor  which  it  \\.is  iiiMiited,  is  ilu  !■■,  upon  an  analy  is  of  the  agrec- 
nienl,  room  for  doubt  that  the  ail  of  all  the  stoikhohhrs,  oflicers 
and  directors  of  the  company  in  signing  it,  should  be  imjjuted  to 
them  as  an  at  t  doiu  in  their  cai)acity  as  a  corporation?  We  think 
not,  since  theri  by  all  th.e  property  and  business  of  the  company  is, 
and  was  intended  lo  be,  virtually  transferred  to  the  Standard  Oil 
Trust,  and  ia  controlled,   through  its  trustees,  as  elTeclually  as 


56  iNDrsriMAi.  (■(lmi;in ations  and  Tiusrs 

;t  a  l..rnial  transfer  had  been  n^adr  hy  the  directors  ol  the  com- 
paiiN'. 


It  therefore  follows,  a^  we  think,  imm  the  d.^russ.on  ut  haxe 
,iven  the  subject,  th.t  where  a,l.  or  a  na,onl  v,  ,,,  the  >tc.ckhoklcTs 
comprising  a  corj-oration.  .lo  an  act  which  i>  deHj^ned    o  attccl    he 
,         rty  and  bu.ine.s  of  the  con^pany.  and  which,  through     he 
nrol 'their  numbers  onv  them  ,.er  the  selecfon  and  condu.    ol 
the  corporate  agencies,  does  alicct  t!.-  property  and  business  of  the 
c  mp  nv   in  the  .ame  m.nner  as  if  il  had  been  a  lorn^d  resolution 
:^":iSard"of  director-.;    .nd  the  act  so  done  is  ul!ra  .v..  <         o 
corporation  an.l  a.aii.t  tlie  public  pohcy.  and  was  'l-"';  '  /^    '^^ 
their  in-hvidual  capacity  f.  r  the  purpose  oi  ;-"--  l"«.^^    .^ 
purpose  and  object,  the  act  should  be  re-ar.led  a-  the  act  of  the 
cZ.ration;  and.  to  prc^vent  the  abuse  ol  corporate  power,  may  be 
challenged  as  -uch  bv  the  ^tate  in  a  pmceedm,:;  ,„  ,;.,„  -'"'7"  "■ 

■^  Thai  the  n:itur'e  ..f  the  a,-reemep,t  is  ^uch  a.  to  ,,reclu(le  the 
dcfen.lant  from  becominfr  a  party  to  it  .>.  v.e  thmk.  t'-  ^Jear  to 
require  much  con^deration  by  u.  In  the  hr>t  place,  whether  e 
a-irnu.nt  shoul.l  be  re,arded  as  an^ountin,'  to  a  partnership  be- 
tween the  several  comp.niies.  limited  partnerships  and  ind.vu  uals 
Iho  are  parti..  t<.  it.  it  is  clear  that  its  observance  mu.t  subject 
the  cU'fen.dant  to  a  control  inc..n<istent  with  its  character  a.  a  co  - 
poration.  Tn.ler  the  a.re.ment  all  but  <even  ol  the  shares  o 
he  capital  stock  of  the  conM.any  have  been  transferred  by  he  real 
owner'  to  the  trustee,  of  tlie  IruM,.  v  l,o  h.old.  ,lum  m  tru.t  for  such 
beiiiL'  enjoined  bv  the  terms  ol  the 


(nvner-;  and 


agreement  to  en- 
,l,avor  to  h.iv..  -the  affairs"  of  the  several  c-miumes  "lanaj^ed  in  a 

to  the  interests  (.-t  the  holders  of  the  trust 
le  tru>t.  have  the  ri^'ht,  in  virtue  of  their 
hip  and  l>v  the  tirm>  ol  the  a.ureement,  to 
.('I'ect  -ach  director,  of  the  company  as  they  may  see  ht.  nay  more, 
mav  in  fact  select  then^.eU  c s.  Tlu.  law  re<iu.res  that  a  cor])oration 
should  be  ontn.lied  and  managed  by  its  directors  in  the  interest 
of  its  c-vn  stockholders,  and  c.mformable  to  the  purpose  ior  whuh 


manner  mor-t  conducive 
certil'icates  issued  l)y 
apparent  heal  ownership  an 


it  was  created  bv  t!.e  laws  ol  its  state.  IK-  ihisaKirement  in- 
directly it  is  true.  l,ut  none  the  less  etiectually,  the  defendant^  is 
eontrniled.  and  manai^^ed  by  the  Standard  OilTrusl.  an  a...ociatiun 
with  its  principal  i>lace  of  business  in  New  \  ork  Tity.  and  orpan- 
iml  for  a  i.urpo-e  contrary  to  the  policy  oi  our  laws.     Its  object 


I 


JiDKiAi.  Attack  ox  tui-:  Trtst  57 

w.i>  ti>  <;\-lai)li-li  a  \irUial  inonopuly  of  the  Ijusine--  of  producin;^ 
pitrnltuni,  and  of  manufacturing^,  rrlinin;,  and  dealing;  in  it  and 
a!i  it--  pn)duct>,  throughout  tiic  entire  country,  and  bv  which  it 
nuj,'ht  not  nurJy  control  the  [iroduction,  but  the  {)rice  at  its 
pleasure.  All  -urh  associations  are  contrary  to  the  policy  <,f  our 
state  and  \oi(!.  Salt  Ci>.  v.  (iidhrie,  35  Ohio  St.  000;  Emery  v.  Ohio 
Camllc  Co.  47  /-/.  320. 

■;.  The  defendant  relics  upon  a  pnn-i-ion  in  section  67S(),  Re- 
vised Statues,'  a.>  a  bur  to  the  action.    That  fjrovision  is  as  fallows: 

'■Xothin;.^  in  this  chapter  contained  sliall  authori/.e  an  action 
a,L;ainst  a  corporation  for  hjrfeiture  of  ch.arter.  unless  the  same  be 
cornnienced  within  li\e  years  alter  the  act  csmplained  of  was  done 
or  conmiitted." 

It  is  contended,  however,  by  counsel  for  the  plaintilT,  that  this 
section  does  not  apply  to  a  proceedin;,'  instituted  on  l;eh,'.lf  (,f  the 
.-tate  by  the  attorney  general  to  forfeit  the  c!iarter  of  :i  corpora- 
tion; that  it  was  only  intended  to  api)ly  to  like  i)rocecdings  by 
prostcutin;: attorneys.  The  argument  is  based  upon  vdiat  isclaimed 
to  have  been  the  law  prior  to  the  revision,  and  lliat  tiiere  couM 
ha\e  bicn  no  intention  to  change  it  in  this  regard  by  the  abo\e 
provision.     We  cannot  adopt  this  conclusion. 


Hut  the  whole  of  §  6780,  Revised  Statutes,  is  not  quoted  by  the 
defendant;  ii  further  [irocceds:  "\or  shall  an  action  be  brought 
agaiii.-t  ;i  corporation  for  the  exercise  of  a  power  or  franchi^e  under 
its  charter  which  it  has  used  and  exercised  lor  a  term  of  twenty 
years."  Therefore  within  that  time  such  a  j)rocee(ling  mav  he 
brought.  The  defendant,  as  we  have  sliown,  in  making  and  en- 
tering into  the  tru^t  agreements,  exercised  a  power  for  which  it 
had  no  authority  under  the  laws  of  this  state,  and  is  continuing 
to  perform  the  agreement  on  its  part.  .   .   . 

ExiinuT  2 
state  v.  nt.braska  hi- i!i  I  inc;  company' 
Mwwnr.,  J. 

\  hi-  is  a;i  action  of  (/no  'darranlo  bniuglit  in  this  cuurt  to  obtain 

a  lorfeiture  (4'  tlie  diftndant's  corporate  franchise.    One  Wool.scy 

'  Thu^  ill  ori-inal.— Kd.  '  211  Xch.  700;  46  X.  W.  \~- 


58 


Indvstriai.  CdMmN'ATroNS  AND  Tkists 


was  Dcrmiltcd  to  mlvrv.ur  in  t!u-  ca^'.  An  an^u  vr  was  tiled  by  the 
Sndant^  and  the  cau.c  rc.crmi  .-  Jud,.  I'uund  to  take  the 
teslimuny  and  Iind  the  l^^ues  uf  tads.  .  .  . 


Section   i-s  of  .ter   if),  Cnmp.  Stats.,  provides  that  "  Ainy 

number  ..f  n  r>ons  >aav  be  a^.cciatcd  and  incorporated  lor  the 
^!Sionl,f  any  hnvful  In.ine.s,"  ete.     It  .s  a  -  P-^  ^'^    - 
rhii.ter   i^  that  "So  nuu  h  o!   the-  eomnion  law  ot   l-nuand  as  is 
t^UcM^,  a^Kl  not  inconsistent  with  the  -"-^^'.V;'-''.;  ;;.    ^^^l 
States  with  the  or-anic  law  ol  this  territory,  or  with  au>    au  pas_-c( 
o    to  be   ,as..ed  In'  th.-  legislature  of  this  territory,  is  adopted  and_ 
declared  to  be  law  uUhin  sai.l  territory.-     'I  hese  provisions  c.t 
statu  e  were  passe.l  bel..re  the  admi-.ion  o,  the  state  into  the  Lnum 
and  hai' continued  m  force  ever  since.     A  corporation  ihereu-re 
Sn  only  be  orf^ani/ed  under  our  laws  lor  a  laNvful  puri-o^e,  and  anv 
acts  done  bv  such  corporation  for  the  accomplishment  <>   a  puri,,.e 
noMawful  is  unauthori/e.l,  in  execs.  „t  us  i.owers.  and  therelore 
meVd  and  voi.l.    dhe  act-  of  a  corporation,  to  be  un  awfu  ,  need 
not     ecessarily  be  ;.„/.;  prohibita  or  m,hm  ui  .sr,  although  such 
acts  are  illegal  in  all  cases,  but  any  act  .,f  a  corpc.raUon  v.hich  by 
the  terms  ot  its  charter  i.  i-  not  authorized  to  do,  is  m  excess  of  its 
nowers  and  therelore  unlaw tul.  u  n       » 

^Contracts  in  total  restraint  of  trade,  as  that  a  person  .shall  no 
carry  on  his  buMiuss  anywhere  in  the  state,  are  void,  no  matter 
what  the  consideration  nuiy  be.  because  the  el.ectof  such  coi,tract 
must  be  injurious  to  the  public    The  -rly  cases  in  regard  to  con^ 
tracts  in  restraint   of    trade  were  reviewed  by  Parker,  Ch.  J.,in 
Mitchcl  V.  RrxfioUs,  I  P.  Wni.'s  iSi,  decided  m  1711,  and  it  was 
held    in  effect,  that  contracts  ir.  tot.d  re-tramt  of  trade  were  v.mJ, 
and  "that  contracts  in  parti:d  restraint  of  trade  were  also  void,  un- 
less there  was  a  sutTici.nt  consideration   and  a  s<««i  reason  ...r 
.nterin-  into  the  contraU.     In  Ilonur  v    .UH.rd,  ,,  1  nip.  y^2, 
contracts  in  total  restraint  of  trade  were  l-:eia  to  be  void.    To  the 
same  effect  are  Ilonur  v.Oravrs,  7  Bin^.,  7,^5.  II^'y}^f  ^-      ''""J- 
2  Chitty  R    407.     These  cases  have  j:.  nerally  l)een  loll.med  in  th  : 
countrv      \  well  coasi<UTed  case  on  tins  subject  is  Un^e  v.  U  crk, 
2  O  St     s  'o   in  which  it  N.as  held  tint  bi  fore  such  contract  can  be 
enforced,  it  must  api.ear  by  the  plea<lin-s  and  pn.ofs  that  the  re- 
straint is  partial,  that  it  is  reasonable,  and  founded  on  a  pood  con- 
sideration, and  this  seems  lu  be  the  law  at  the  present  time,    (/.cru;- 


Jt'dkial  Attack  ox  tuv.  '['iust 


59 


renrr  v.  KidJir,  lo  Haib.,  641;  ri,r((  v.  i ult  • ,  S  Mass.,  22i,\  Palmer 
V.  SUi'hins,  ^  I'ick..  i.SS;  Wliibuyv.  SlayloH,  40  Me.,  231;  Rubles 
V.  Ball  ,  7  Cow.,  307;  Div^y  v.  Shockcy.  1 1  Ind..  71;  Botcser  v.  Bliss, 
7  Itlarki'.,  ',44;  BcarJ  v.  lM)inis,  h  Ind.,  204.  iJiappi!  v.  Brockuay, 
21  W  eiul.,  1  5S.) 

WhatcALT  tends  to  dcstniy  coni()(.tili()ii  ai.d  create  a  monopoly 
is  contrary  to  public  policy  .md  therefore  unlawful,  {i'oal  Lo.  v. 
CoalCo.,ti^  I'a.  St..  173;  C  /.;/.' i'.  Md'onoui^liy,  -i)  III.,  :;4();  Railroad 
Compduy  V.  Colli;:  .  40  Ca.,  5.S2;  Uazdhur^t  v.  Railroad  Co.,  43 
id..  13;  J'rd,is.  Co.  V.  J'ipc  Line  Co.,  22  \V.  \a.,  600;  People  v.  C.  G. 
&"  r.  Co.,  22  N.  E.  Rep.,  7  uS;  Richardson  v.  Buhl,  43  N.  \V.  Rep., 
1102.)  In  the  latter  case  it  was  held  that  a  contract  in  furtherance 
of  a  monnpol}  and  urowinji  out  of  transactions  in  connection  t!  jre- 
with,  is  a,train>t  public  j)olicy.  and  althou<;!h  the  question  was  not 
rai>cd  by  'he  partii-,  yet  the  court  of  its  own  motion  took  notice 
of  its  illes'al  character  aiid  held  it  void.  .   .  . 


In  .Salt  Co.  V.  Guthrie,  35  O.  S.,  666,  it  is  said  "  Public  policy  un- 
•[ue-tionably  fa\ors  competition  in  tr^de  to  the  end  that  its  com- 
modities may  be  alTorded  to  tlie  consumer  as  cheaply  as  jiossible, 
and  i>>  op])oscd  to  mono])olies  which  tend  to  advance  market  prices 
'o  the  injury  of  tie  L'i'neral  public,"  etc. 

In  .\a:r^atio)i  Co.  v.  Railway  Co..  130  f.  S.,  i,  the  supreme  court 
of  the  United  States,  in  -pcakinjT  of  :  ne  proper  c  nstruction  of 
articles  of  association  oi  corjwrations  organized  under  general 
laws,  says:  "We  ha\r  to  consider,  when  such  articles  become  the 
subject  of  construction,  that  t  ,ey  'c,  in  a  sense,  c.v  par!e.  Their 
formation  and  execution — what  shall  be  put  into  them,  as  well  as 
what  shall  be  left  out—do  not  take  pi. ice  under  the  su[)ervision 
of  any  official  authority  whatever.  They  are  the  production  of 
private  citizens,  i^oiten  up  in  the  interest  of  the  parties  who  pro- 
pose to  become  corporators,  and  stimulated  by  their  /eal  for  the 
{Personal  advantage  of  the  parties  concerned  rather  than  the  general 
good.  .  .  .  These  articles,  which  necessarily  assume,  by  the  sole 
actions  of  the  corporators.  eniTmous  powers,  manv  of  which  have 
been  heretofore  considered  of  a  public  character,  sometimes  atTect- 
ing  the  interests  of  the  public  very  largely  and  very  .seriously,  do 
not  commend  themselves  to  the  judicial  mind  as  a  class  of  instru- 
ments I  .|uiring  or  justifying  :'ny  very  liberal  con^^truction.  Where 
the  'juestion  is  whether  they  co-   orm  to  t!ie  authority  given  by 


6o 


Tndi  ^rui\i. 


('()MI'.in.m;<'N>^  and  Trt-sts 


.,  .tutr  iM   ivvni  lo  rorporalr  ori^ani/alinns  il  ..-  always  to  be 
d^U   mi  :;     iu^t  .instruction  ol  the  powcT^  ,r.ntc.    thcrun, 

.  rUar!  f-r  al!  th.  .,tlur  laws  (.1  the  slate  upon  that  sul  - 
n^e  manner  in  whid.  the^e  powers  shall  be  exerc.ed. 


with 


£\h;ir'.-abi:;tum  to  thei^eneral  law.  .^  .he  state,  --'  •J^.'^-^f 

I'hi.  we  think  is  a  correct  construction  ol  the  lau  rt  latni..  to  sucn 
.rl  ^^  ^Kl  vc  a.lopt  the  same.  Alcohol  i>  an  art.ele  ..  commcce^ 
I  s  ap  led  to  a  hou^und  uses  in  art.  an<l  manulacture.  he 
L  unt  vhch  is  rertifiea  and  used  a.  intoxicatm;,^  dr.nks  orm^ 
brrverv  sm.  1  part  of  the  quantity  actually  distilled,  and  bem« 
art  cl  'of  onu  uTce,  anv  contract  creating  a  monopoly  therein 
r   ■  Sin  t  public  policy  and  void.     A  corporation  can  cxerci.e  n 

>;;r;s  exclpt  sucl  a.  are  .ranted  to  it.  by  )   -  -^-;-'-;-^^  ^^ 

o°    Ul  i  Aop-^y!  -al  and  per..,nal,  together  with  Us  iranduse 

•  ,1  power-;  necessirv  to  pr.rperly  carry  on  the  business.     ((>•  A>. 

( ■■    .'        /v  Co..  .ul>-ra.^    The  fact  that  the  corporation  has  au  hor- 

,v<o    u    an  end  to  it.  existence  by  a  vote  of  a  majontv  ol  it.  stock- 

Ideh  which  event  it  may  proceed  to  settle  up  its  al.air.  uisj...^ 

,•  it.  propert  V,  and  divide  its  capital  stock  and  >^\^''^^^:'  '^^^^""l 

U,  the  .tlae/doe.  not  authorize  it  to  terminate  ,s  existence  b>  a 

.ale  an.l  disposal  of  all  its  property  and  n-hts.    (/</.)      ^ 

The  inuiims  in  thi.  case,  to  which  no  objection  .s  mao..._  ckarl> 
show  that  theobject  of  the  Distilli.,  Company- in  ^ntcrin,  nUo  the 
illo'^al    combination    was    to    de.tn.y    competition    and   cr  at.    ^ 
lo^opolv,  not  only  by  limiting  the  production  "  ;^  -'-  ;J   ^     . 
di.mar.tlinu  as  many  distilleries  as  the  tru.t  saw    lit,  'd.M>  uU} 
IJ      U  tli^  manufacture  of  the  article  except  m  a  '^  -^j; '^;;  ' 
^■nts  eontrolled  bv  the  tru.t.  and  thus  it  would  be  ^'"^il'l^'  ^     \J  •" 
r>,l  t.rices  prevent  production,  and  create  a  monopoly  of  the  most 
in^^Vharacter.'   .l«y  contract  enUrai  into  ..//,  --     "«  ;' V-' 
iu  nc^'  h.  undn-  II,-  l.i:.s  of  this  state,  null  and  von!,  and  Ih    .  onuy 
ance  from  the  DisHHin^  Co,r.,Mnv  to  the  trust  'vas  ui  nwtrairntum 
Th    Zorit.  confcrn-d  In-  the  ^t.lntrs  on  that  eom pan.  :n  execs 
Jf  Z  pLrrs  .panted  by  its  ehartrr.  and  against  pudie  poliey  and  rouU 
and  HO  title  passed  t,y  sueh  eonveyanee.K  .  . 


» Italics  arc  ihc  editor's. 


I 


to, 


IriJUiAi.  Ai  r\(  K  ox 


I'HI 


Kl'ST 


f)I 


.  .  Thi'  art  .  f  iSSg,  in  rt-lalion  to  tru.st^,  has  not  been  ri'lViTi'd 
iind  its  ai>j)lication  io  this  case  will  hr  further  considered. 


ExiiUiir  ,.; 

PEOPLi;   V.    NORTH    KI\  1:K    Src.AR    RKIINING   COMPANY  ' 

Finch,  J.  The  judpment  sou;-'ht  against  the  defendant  is  one 
of  eorj)orale  dealh.  The  State,  which  created,  asi^s  us  to  destroy; 
and  the  penalty  invoked  rejiresents  the  extreme  ri;,'or  of  the  law.  Its 
inlliction  must  rest  ujxjn  ;.'rave  cau^e,  and  he  warranted  by  materia.l 
misconduct.  The  life  of  a  corporation  is  indeed  less  th.an  that  of 
the  humblest  citizen,  and  yel  it  envelopes  <jreat  accumulations 
of  property,  moves  and  carries  in  larL'e  V(ilume  the  business  and 
enterprise  of  the  jjcople,  and  may  not  be  destroyed  without  clear 
and  abundant  reason. 


Two  questions,  therefore,  open  f)efore  us:  first,  has  the  defendant 
corporation  exceeded  or  abu-ed  it>  powiTs,  and,  second,  doe:^ 
that  excess  or  ;'.bu.~e  threaten  or  harm  th.e  [)ub!ic  welfare. 


.  .  .  We  find  disclosed  by  the  proof  that  it  ha.-^  become  an  in- 
tfi^ral  part  and  constituent  element  of  a  combination  which 
possesses  o\er  it  an  absolute  control,  which  ha>  absorbed  most  of 
its  corporate  functions,  and  dictates  the  extent  ami  manner  and 
terms  of  it>  entire  inisines>  activity.  Into  that  cc^iibination, 
which  drew  into  it:^  control  sixtei'n  other  coi[iorati(j:is  engaged  in 
the  rehning  of  sugar,  the  defendant  h.a>  l'oiu  ,  in  some  manner  arid 
by  ^onie  ()rocess,  for  as  an  uncfje^tionahle  truth  we  fmd  it  there. 
.Ml  its  stock  has  been  transferred  to  the  central  association  of  eleven 
in(l:\iduals  denominated  a  "Board";  in  exchange  it  has  taken  and 
di>tributed  to  its  own  stockholders  certi!".cate>  of  the  board  carry- 
ing a  proportionate  interest  in  what  it  describes  as  its  ca[)ital  stock; 
the  iieA  (lirc(l(.r.-  of  the  defendant  cor])oration  have  been  chosen 
by  the  board,  made  eligible  Ijy  its  gift  of  single  shares,  and  liable 
to  removal  under  the  terms  of  their  aiipointment  at  any  moment 
of  independent  action.  It  has  lost  the  power  to  m.ake  a  di\idend, 
and  is  com])elled  to  pay  <,ver  it.^  net  earnings  to  the  master  whose 
servant  ii  h.as  l)ecome.  I'nder  the  orders  of  that  master  it  has  ceased 
'121  X.  V.  5Sj;:jX.  K.  8.5.;. 


(,2  INDVSTUIAI.    COMF-INATKINS   AND   TRUSTS 

,  ,  rrr.ne  su-nr   an.i  l-v  m>  nimh.  Ik,    Ir^-cnal  the  supply  upon  ihe 
;;^r    U      n   ot  >tir  unk.s  ih.  ,n,.t.r  appn...  an.l  yet  ,s  en- 
ill  .1  to  reeeivc  from  the  earnin;^s    f  tl.e  uHht  reluu-ne..  niassed  a. 
u    n     h     trra^urv  of  the  tn.anl,  its  proportionate-  share  tor 
i;[;'!rLl.it/o.vn..,e,..ol.rsMon.^U^^^^^^^ 

"'^tc:::ed'urit":n ;:;:;;::;  ;ei;e;:.-rai;;^^^ 
S^^r;;a,!:;::^:^''u.rs 

^1^  t^rirLand  for  the  purp.-ses  n.ention.l  jn  J  ;;  ajj---^ 
an<  thU  this  action  elTeetuallv  lu.lize.l  thr  eontn,!  of  the  defendant 
company.  M.  far  as  sueh  control  can  be  .eeured  by  the  votmg  pouer, 
in  that  board." 



The  combination,  therefore,  framed  by  th-  <1.  -xl  ^^^s  a  tni^t .  an<K 
if  ere-ited  by  the  a.ri.oratmn^.  or  m  any  re-peet  the  consequence 
r\    od^t    f  their  action,  .^-ne  inevit.d,le  rcK>Us  would  be  cer   un 
to     11  u-     Hut  here  we  .ncounter  the  ^tron^h.ld  nt  the  appellant  . 
a  iument  which  i^.  that  if  the  corporations  are  in  some  m.anner  m 
?S  a  m   ina  ion,  .lu  v  arc-  th.Te  >oKly  as  the  rc.>lt  ot  a  o.n  nu; 
.the r    ban  their  own;  are  there  without  cor,>or,dr  actum  on  t  u.r 
a       a      U  are  sulUTcrs  an.l  not  sinner.    The  rea^onn,,   ea.hn;, 
u  tin  te.ult  i-.  -  -.verciv  tecluncd  a.  to  have  su^^otcd  a  ju^- 
kaUon  a  nu.,  renundi,,.''one  <.  an  'polo.v.    We  an-  .a  ed  upon 
"vc      hecorporanon,tlu.ab-t,.K 
amiac\  n,  corporators  a^  it  we^e-.  to  separate  ,n  our  thought  the 
;.^ul  from  the  body,  and,  adnut.in,  the  sms  of  the  latter  to  ad- 
judge  that  the  former  renuuns  pure. 


T  tliink  there  mav  be  actual  <-orporate  con.luct  which  is  not 
formal  coq-oratr  actio„;'and  wh.Te  that  condu.  t  i-  directed  or  pro- 
'  ...      ,^^,,,  ,,,■  ,,n-,cprs  and  stockholders  by 

.h  can  (Missess  and       i  Id  the  <  or- 
( ii.ir.u  ter,  am!  it 


(luced  by  the  wliole  body. 
e'vcrv  living  in-trunu-ntalily  .\tuci 

that  coiiduet  is  of  a  corj-ora''' 


porate  Iranclnsc 
illegal  and  injurious 


ni 


av  <lescr\-e  and  receive  tla-  penalty  ol  .h^-o- 


\.     . 


JfiiciAL  Attack  ox  thk  Tkist 


63 


lution.  There  always  is,  and  there  always  must  be,  corjioratc 
tonchict  without  formal  corporate  action  wher.'the  thin^  ch.iiienji;ed 
i-^  an  omission  to  act  at  all.  A  corponition  orj^'anized  in  the  public 
interest,  with  a  view  to  the  pu!)lic  welfare,  and  in  the  expectation 
(if  bi'iiel'it  to  the  conmiunily,  which  is  the  motive  of  the  State's 
>,'rant,  may  accej)!  the  franchise  and  h.uld  it  in  sullen  silence,  doinj; 
nothintj,  resolving  nothinjj;,  furnishint:  no  formal  corporate  action 
upon  which  the  State  can  put  it->  tin.t^er  arid  >ay.  this  the  cor])oration 
has  done  by  the  aj^ency  throui^h  whith  it  is  authorized  to  act. 
That  is  corporate  conduct  which  theSlate  may  (luestion  and  punish 
without  searching,'  for  a  formal  cori .urate  act.  The  directors  of 
a  corporation,  its  .luthori/ed  and  a(  ti\e  atreiicy,  may  see  the  stock- 
holders pervertin.!i;  its  normal  purposes  by  hantlinjf  it  o\er.  bound 
and  helpless,  to  an  irre-i)on-ible  and  foreign  authority,  and  omit 
all  action  which  tiny  (iU.^ht  to  take,  offer  no  resistance,  make  no 
pri)te->t,  but  silently  ac(|uiesce  as  directors  in  the  wron;:;  which  as 
stockholders  they  have  themselves  helped  to  conmiit.  That  ajzain 
is  corjHjrate  conduct,  thouj^h  there  be  an  utter  absence  of  directors' 
rcMjlutions.  It  is  a>ked  v.hat  they  Ct  Id  ha\e  done  to  prevent 
the  organization  of  the  tru>! ;  how  they  wiTe  nc^iii^'ent  and  unfaith- 
ful as  corporate  officers  by  their  onii--inii  to  act;  what  good  a 
mere  ])rotest  or  obji'Ction  would  have  accomplished;  what  elTective 
fnrm  their  res*  tance  c^aild  have  assumed?  The  answer  is  that 
tluy  could  ha  .e  refused  to  reeogni/e  the  ille;;al  trust  transfer  of  the 
stock;  they  could  haxc  declined  to  rt<jister  the  new  ownership 
ujxin  their  stockdiooks,  the}'  could  have  said,  and  acted  upon 
their  words,  that  the  oriijjina!  stocklioldtTS  remained  not  only 
the  benehci.U,  but  the  IilmI  ov  ners  of  tlu'  stock;  and.  if  tlie  board 
trustees  ap|iealed  to  the  law.  the  re>i-tinj;  diri'cturs  cduld  chal- 
lentre  the  le^'ality  of  the  tran-fcT  as  moulded  by  the  combination 
agreement,  and  mi;,'ht  have  defeated  the  tru-t  and  shattered  it  at 
the  outset  of  its  cari'cr.  So  nine  h  thcv  Kuid  Iia\e  dmie  as  corpo- 
rate officers;  so  much  it  was  tluir  duty  to  ha\e  done  as  repre- 
sentatives of  the  corporation;  and  when,  bty<ind  that  corporate 
ne!,'lect,  thiy  recognized  the  v.ilidity  of  the  sto(  k  tr;insfeis  in  trust, 
l)Ut  the  lu'w  and  unl.iuful  owner-^hip  u[h  n  iheir  bonks,  and  acce[)ted 
its  votes  in  the  (  huice  i>\  new  dirii  tnr--  v.  ho  were  to  throttle  the  in- 
drpeiidt'nce  <if  the  corporation  and  chain  it  to  ilu'  will  of  the  trust, 
I  think  we  must  shut  our  cyi's  in  wilful  blindness  if  we  fail  to  see 
bnth  corpor.ite  lU'j^ii'Ct  and  mrpuratf  .ution. 


64  INI.USTKIAI.    V-..MK1NATI(.NS    AND    'riUSTS 

L<1  has  l,c.n  ^M'l>'--l;'-''^^^lV';i  ,,;;,■  h.  cUccliv.  aclinn 
serves  very  well  K.  ^  ^■^^r'l^^'",""'  ,,1  Lv  the  law;  an.l  the 

un.1  agency  of  n^^^">V"^'''  t.t  ,  ■  v  ca'  ha.  l.cn  tluU  col- 
suhstanlial  i,K,ury  ahvay.  -  ^  -  ;^;'  ^^  corporation  and  those 
lective  action  an.l  a.-enc>  .  A>  '^^^  '  "  ^  •  ^^,j.^„,.  ;,  material. 
.vith  ^vhom  i.  .Ual..  "-.■-^•:;;^;   '"   ^^^^'^^^.Ual  inliuirv  is  only 

but  a.  between  it  an.l  'he  ^  ''\  '  .;^,  ^  ,  ^'^;\,Hat  i  ha'^,  in  fact, 
whaUlml  collective  act.-.n  an.l  a;^tm>    as     mcwui  ^^^^_^^ 

accomplished,  what  >s  seen  to  Ije  't-  <-i'^  '^^  e  State  ^ave  .h. 
its  c..n.luct      It  ov^ht  not  to    »;  ^V,,,^  ::,;,;;,,,^ancl  al- 

franchi>e.  the  charter,  not  ^^  J''  ^^ '  "''  ;\,,  ,,,.  ,„nH>rators.  the 
„,..,l  neh.lou.  hct...n  .,1  ''^'[.V^"'";  ';''.',;,      1  bv  ihenu  to  re- 

•-l>-;>^'^'h  ''-r^n  '^;;'.  nSh  tl  hana>  and  a.Ul  energy 
aoun.l  to  tlu.r  benel:  .-  ^^^^^^^  -^  -^  ,j^,n  from  them  as 
to  their  .apiial.     It  it  is  taken  -'^^'^V  ,ii..,p,H'ars.     The 

in,li^i.lual.  and  corporat..rs  ^'"<1/!^-  ;^^;^  ",      V.    1  'i  u^l  atten.i 

henent  i.  theirs,  '^^l'"'- ^l"  ,;^  ^  ^Ih  !  !  ,'  ,  c.>llectively. 
,„a.lependupon  th;.rcond  J    ,a    Uh  n  U^^  ^_^^^  ^^^  ^^^^.^^_ 

i,v.  of  the  eorporation  '^^' ''■  ;'\  ^ '\'\"V,  ,  ,  ,  .fite  max  review,  and 
-        ,,a.  been  cor|>o,ate  con.luet  -^-^^l^-:l;^l^^;;^2,^^^,  ,„ion. 


tluri 


u. 


,lbe  defeated  by  the  a..unied  innocence  < 


by 
te 
to 


JrniriAL  Attack  hx  -^he  Trust 


6S 


W 


4 


moved.  Its  stockholders,  retaining  their  hcnctlcial  interest,  have 
separated  from  it  their  volin-,'  [Mjv.er,  and  so  parted  w  iih  the  control 
which  the  charter  ^ave  them  and  the  State  re(|uired  them  to  exer- 
<  i-e.  It  has  a  board  of  direct(it.>  nominally  and  formally  in  office, 
liut  qualified  iiy  shart>  whidi  they  do  mit  own,  and  owing  their 
oilicial  'ile  to  the  hoard  which  can  end  liieir  power  at  any  moment 
of  disobedience.  It  can  make  no  di\idends  whatever  may  be  its 
net  earnings,  and  must  incumber  ''s  i)roperty  at  the  command  of 
itr  master,  and  for  purposes  wholly  foreign  to  its  own  corporate 
interests  and  duties.  At  the  com.mand  of  th.at  master  it  has  ceased 
to  refine  sugar,  and  without  any  doubt  for  the  [lurpo.-e  of  so  far 
lessening  ihe  market  sun])!y  as  to  jtrevent  what  is  termed  "over- 
pmdu  ••'■■m."  In  all  tli-.-e  respect.-,  it  has  wasted  and  perverted 
the  i)ri'  'e,t  ^  conferred  by  the  charter,  abused  its  jxjwers,  and 
pn,\-e(i  ui.iaiinful  to  its  duties.  But  gra\er  still  is  the  illegal  action 
substituted  for  the  conduct  which  the  State  has  a  right  to  <'.\pect 
and  refiuire.  It  has  helped  to  create  an  anomalous  trust  which  is, 
in  substance  and  tlleit,  a  partnership  of  twenty  separate  cor- 
pnrations.  The  St.ite  permits  in  many  ways  an  aggregation  of 
capit;:l,  but  mindful  of  the  possible  dangers' to  the  people,  over- 
balancing the  benefits,  keep-  upiiii  it  a  restraining  hand  and  main- 
tains over  it  a  iirudeot  super\i>ion,  where  such  aggngatitm  de- 
I"  nds  uj)on  it-  permission  and  grows  out  ui  its  corporate  grants, 
it  is  a  violation  of  law  for  corporation.,  to  enter  into  a  i)artnership, 
(.V.  I'.  lT  .V.  ('.  C(i.  V.  /'.  Bank.  7  Wend.  .\i2:Cl(\iKt;!h  r  v.  Meredith, 
I  Wall.  2<);  WliittiHton  Mills  v.  i'pton,  lo  Gray,  590.) 


...  It  is  said,  however,  that  a  consolidation  of  manufacturing 
rnrpor.itions  is  i)rrmitte(l  by  the  l.iw,  and  that  'he  tru-l  or  com- 
bination or  pa  rtniT-hii.,  liowtAcr  it  m.iy  be  described,  amounts  only 
to  a  jiractical  consolidation  which,  public  policv  di^es  not  forbid  be- 
'  ..Use  the  statute  permits  it.    (Law-of  iSf-;,  chap.  <)()o;  I.awsof  iS,S4, 

■'•'P-  367-)    The  refineries  did  not  a\ail  themseUe-  of  tluit  statute. 

i  iuy  chose  to  disngard  it,  and  to  readi  its  i)raitic.il  results  with- 
out subjection  to  the  prudeiiti.d  re-tr.iints  with  wliidi  the  State 
accompanied  its  permiv-ion.  If  there  li.id  been  a  conMilid.ition 
under  the  -t.itiite,  one  single  corpor.ilion  would  have  taken  the 
III. ice  ot  I  lie  others  dissolved.  Tiny  would  have  disap[)earul 
"ilteriy.and  not.  as  under  the  trust,  iemaine<l  in  apparent  existence 
to  threaten  ai.a  menace  other  organizations  anil  occupy  the  ground 


«+ 


66  INDUSTRIAL   COMBINATIOKS   AND   TRUSTS 

iu.U.ftfrec  Undcrthc  statute  the  resultart 
^•hich  otherw,se  -«f  If J^^^'^  "  , 'tion  du  > vin,  >t.  existence  trom 
combination  nvouIcI  it>el[  '''^/^  f  '^^^^^^  ^^  the  State,  and  subject  to 
the  State,  owing  duties  and  <>^'l  f f  ^^^^^^^^^        ^-.t.  as  here,  an  unui- 

the  control  and  ^uP^^'^f "  f  ,1^",!  ,,  ^in'^^'  partnership,  having  no 
corporated  board,  a  colossal  ami  MR|  J  j^^,,.  Under  the 
corporate  functu>ns  and  o^^.ng  t^^o  corp    ;i  ^^  ^^^^  ^^^ 

stalute  the  conso  .dated  ^onM  -  ^1^  V  ^  I  ^^^  ^^^^^^^,  ^^,,,^ 
corporations  could  have  ^^ /.^^if  ;^;^^^ 

to  ihe  tair  ^^R^'-^'R^^^'^.^-^'^^V  he^e  a  ca pi  d  ^^ock  double  that  value 
panics  absorbed;  and  "<;  ^as  he  c  a  ca  -^^  u,  increase. 

!u  the  outset  and  ^-\f^^^^,,  further  to  indicate  th-  m- 

A.a  sJ  .e  ha.,  reached  c^r^ncj^^^^^ 
to  have  been  '-^^^^isu-d    tha    the  <1U      ^  ^^^^^^^^^_  ^^^  .^^  ^, 

lalcd  its  charier  and  f;\'l^  /"  ^'^.^  ,i  ^„a  important  as  to  ju>iify 
duties,  and  thr.t  in  respects  ^;  "^^J^^^'^^^^^^eci  that  result,  it  beconus 
a  judgment  of  dissolution.  ";  ^^Fj^  ^  .cussion  over  nionopo  les 
„iak.s  to  advance  '"  J' .^Jf/^'i^,  ^a  the  ,>n>blems  .-f  political 
and  competition  an.i  ':^^f''"V/\hem  until  sonle  pmper  emer^  ncy 
cconomv.  ()"■•  ^^'^y/' '*;>''' \vhmteithei  api.roval  -.r  d.^ap- 
compels-  their  consideration     ^^^^^^,^  1,[  Uie  case  by  the 

proval  of  the  vicnvs  ^^^^P'''.^^'  \"  \'"  , fj'  h,t  in  thi>  State  there  can 
Courts  below,  we  are  ^f^^^^^''^^  ndependent  corporations, 
be   no    partnerships   of    ^M^ar  tc    a  ^^^.^^^^  _  ^  ^^  ^^^^^. 

^vhether  dirvctly,  -.^  J^;;'  ,  ^  ^l  and  disregard  .he  statu- 
no  sub-^tantud  ^""^"'  ^''^V'^  ,  ^  ^  u  that  manufacturing  orpora- 
tory  permi^smns  and  T^^^; '"^^ '^  ,vere  created,  or  one  under 
tions  mu>t  be  and  remam  ^c^cral  a    me. 

"^^iStgrnent  appealed  from  should  be  affirmed  with  costs. 
All  Concur. 


CHAPTER  V 


TIIK   HOLDIXf.    COMPANY 


% 


son: 

Long  before  the  attack  on  the  trust  form  of  combination  had 
erased,  the  proI)lcm  of  the  tvpe  of  combination  which  should  suc- 
<^  A  it  h.id  been  solved.  L  il  about  1S70  the  weight  of  FOnglish 
authority  had  I  n  against  the  power  of  onecorporation  orcompaiiy 
to  become  a  shareholder  in  another,  unless  such  power  should  have 
been  expressly  conferred.  In  this  country  the  courts  had  inclined 
to  the  same  view  of  the  matter.  In  nunienius  cases  in  the  State 
coii,  ts,  it  had  been  repeatedly  held  that  r''  corjioration  had  the  im- 
plied right  to  purchase  the  shares  of  another  com[)any  for  purposes 
•  f  control,  although  it  might  come  into  posrcssicm  of  such  stock 
.1-  security  for  a  debt  or,  in  some  cases,  if  the  transaction  could  be 
regarded  as  one  reasonable  or  necessary  for  etTectuating  'he  objects 
for  which  the  company  was  incorporated.  In  the  Federal  court ., 
a  similar  attitude  was  taken. 

\o  mor.*  than  the  implied  right  to  hold  the  stock  of  another  cor- 
i"  rat  ion  existtxl  did  any  statutory  enactments  prior  to  iSS.)  author- 
ize such  procedure.  In  that  year,  however,  the  State  of  New  Jersey 
passed  the  noteworthj', — or  notorious, — amendment  to  her  cor- 
poration law  jirrniitting  such  attion,  a  step  in  which  she  was 
-uh^t<]uentl\  followed  by  other  states  as  well.  The  exfiibits  in 
thi-  group  have  been  designed  to  explain  this  devel  i)ment. — Kd. 


(iRorp  I 

roWKR   or   ONT,   CORPORATION    TO   HOLD   STOCK   IN    ANOTHKR 

KXIIIIUT    I 


m:  LA  \T.R(.\i;  RI.FKIca;RATINo   MACHINE  COMPANY  V.   GF.RMAN      AV- 


IN(;S   INSIUUTION 


1 


(Supreme  Ct<\\r\  .>!  the  Ciited  States,  October  ,30,  1899.) 
Statement  by  Mr.  Ju^^ti'e  Krown: 


I  :>  I  .  s.,  40, 

<'7 


68 


iNUrSTRIAl.    C'OMl;IN\TIONS    AND    TRUSTS 


This  was  a  consolulalion  -1  d;^!.'  actions  brought  by  the  Gcri..an 
S.v  n^s  ln^  itulion  an.l  srv.n  oUkt  pkiinlitls,  m  the  Circuit  (...urt 
onS'ci^"-  r^  -ui>.  against  the  Dc  La  NVr^nc  Kctrmcrat.n« 
(M  int  cu>     1  Vcr-'ne,  its  prcsulcnt  and  principal 

^.aS<'u":;'i:  nai'y.  '-^  '  lllur;  to  aclLr  to  „lai„tMs  cortain 
sKjck  in  the  Kcfri-;cratinK  Conipanv. 

The  principal  ciuc.tion  in  this  case  is  whether,  under  the  laws 
of  \cw  York  prnvidin,  for  the  organization  of  manulacturinR  cor- 
porations, such  corporations  are  authorized  to  purchase  the  stock 
o?  a  rSl  cr.rporalion  for  the  purpose  of  suppressing  competition 
and  obtaining  the  management  of  such  corporation. 

The  facts  of  the  case  are  substantially  as  loUows:  The  Con- 
solidated Ice  Machine  C.m.pany  (hereafter  ^^^^^l^;^;^'^!:'^ 
solidated  Company)  was  a  corporation  orpam/ed  under  the  la  \s  f 
Cois  and  w  IS  en<;ased  in  the  business  ot  manu  aclunng  and  sell- 
h^^^  refrgeratins  and  ice-making  machines.  Tie  entire  amount 
of^i/sued  stock  of  such  cor,.oralion  wa^  Sioo.ooo  held  in  various 
pr.po  ions  by  the  plaintillV  in  this  con.  .dated  cause.  Having 
bee, me  insolvent,  the  company,  on  October  14.  iSoc  made  an 
a  -i-^nment  under  the  general  laws  ot  Illmo.s  for  the  beneht  of 
creditors,  to  one  Jenkins,  who,  at  the  date  ot  the  contract  sued  up.on, 
V  as  engaged  in  winding  u])  its  business. 

However  this  mav  be.  sub.e(iuently  to  the  assignment,  and  •  n 

April   16.   iSqi,  the  company  itself,  by  it ^  president   as  party  ot 

0^  tr>t  part    am!  its  stockholder,  a.  parties  o.  the  secon.i  ,Kir 

entered  into  an  agreement  with  the  he  I. a      -j^-I^'.^^^-;  "  ^ 

Machine   Companv,  a  corporation  orgam/ed   under  the   laus  ol 

Ne.v   York    (hereinafter   called    the    Retngerating   Company,     as 

party  of  the  third  i>an.  .,nd  John  C.  De  la  \  ergne,  of  the  S  .te    1 

New  York,  president  of  that  company,  as  party  ol  the  fourth  pa,t. 

This  agreement  is  the  ba.is  of  the  acti.m.     .\tter  reciting    h.it    he 

Refrigerating  Companv  w.is  willing  to  Pcrimre  such  right  as  tlu 

Consolidated  Companv-  and  its  ..ockhol.lers  couUl  a^.gn  in  and 

to  the  a-ets  of  .uci  companv.  that  under  the  laws  ot  lll.noi.  tl  e 

Consoli.iat..!  Comj.any  w.^  not  .'ntitl-.l  to  the  V'-:^^^^^-J^ 

assets  in  the  hands  of  the  a-ignee  until  its  (obligations  ha.l  be. 

(hscharged;   that    the    Refrigerating   Company   was   incorporate. 

with  -i  ^t.)ck  of  S^^o.ooo  when  its  assets  were  worth  $1400,000, 


The  Holuixo  Company 


69 


and  that  its  stockholders  were  considcrinj,'  a  i^lan  of  increaM'ng  the 
stock  to  82,000,000,  of  which  Si, 000, 000  was  to  be  turne(i  over  to 
the  Consolidated  Company  under  the  terms  of  the  ar;reement : 

Therefore,  in  view  of  these  facts,  the  Consolidated  Company 
and  its  stockholders  covenanted  with  the  Refrigerating  Company 
and  its  i)re.>ident,  De  la  Wrj^me,  to  sell  and  convey  unto  the  Re- 
fri.',aTatin^'  Company  all  their  ri,Ldit,  title  and  interes't  in  and  to  the 
assets  of  the  i)arty  of  the  lirst  part,  suhjt'ct  to  the  [)ayment  of  its 
ot)li«ations,_and  subject  to  the  custody  thereof  in  the  legal  custodian, 
R.  E.  Jenkins,  assignee  as  aforesaid. 

The  second  clause  contained  a  covenant  to  issue  to  the  stock- 
holders of  the  Consolidated  Comipany  fully  paid  uj)  stock  in  the 
Refrigerating  Company  to  the  amount  of  Sioo.ooo  in  certain  s{)eci- 
tied  proportions  to  each  stockholder. 

By  the  fourth  clause,  the  stockholders  agreed  within  ten  days 
from  the  dale  of  the  agreement  to  assign  to  De  la  \'ergne,  for  the 
benefit  of  the  Refrigerating  Com[)any,  all  stock  of  the  insolvent 
com[)any  which  had  been  issued,  and  which  they  guaranteed  had 
bcf  n  paid  in  full;  and  within  sixty  days  thereafter  the  Refrigerating 
Company  and  its  president  agreed  to  issue  and  deliver  to  the  stock- 
iiolilers  of  the  Consolidated  Company  stock  in  the  Refrigerating 
Coni[)any  to  the  amount  of  Sioo,ooo. 

Hy  the  fifth  clause,  the  stockholders  in  the  Consolidated  Com- 
[uny  covenanted  to  accejjt  in  lieu  of  the  stock  of  the  Ri'frigeratiiig 
C>-nif)any,  Sioo.ooo  in  ca>L  at  the  ojjtion  of  De  la  \'ergne,  the 
|>re-i(lent  of  the  comiKinv. 

Uy  the  seventh  clause,  the  stockholder.-,  of  the  Consolidated  Com- 
pany agreed  that  for  a  period  of  ten  years  they  would  not  enter 
i.it(j  IT  become  engaged  in  the  selling  or  making  of  refrigerators 
or  ice  machines,  directly  "T  indirectly,  within  the  Unitjd  States, 
excepting  the  state  of  Moiitana. 


0,000; 


.  .  ^.  There  was  also  a  covenant  that  the  Consolidated  Com[)any 
would  not  engage  in  a  s-milar  business  within  ten  years  from  the  date 
"f  the  contract.  The  K  rigi  rating  Cemjiany, however,  did  not  a\  ail 
Itself  of  this  <)[)portunity  to  compromise  with  the  <  reditors  of  the 
Cop'-olidatcd  Con^iJany,  but  allowed  the  assignee  to  dispose  of  the 
assets,  which,  on  a  forced  sale,  lacked  $150,000  of  being  sufficient 
to  pay  the  debts  of  the  Consolidated  Company. 


^O  INUUSTKIAI.   COMBINATIONS   AND   TRUSTS 

But  as  the  po.^rs  ^^^^^l^^^^"'^^^^^ 
are  linv.  ed  to  such  as  the  a^t  tje^^iy  ™^       V    f^,,,,^,,,  ^hat,  un- 

tion  of  these  .mphes   ^;;  ^^^j^^^  ^1^^,^  •    n^t  ^vithin  the  general 

"Z^S^V^Z^^nl^'  theVtocU  of  ..her  corporations 

for  the  purpose  of  controlling  their  management. 

V  .  nnlv  is  this  true  as  a  general  rule,  but  by  the  law  of  the 

Not  only  i^^.l^^^/™;  j^.;  ^.f^.h  this  corporation  was  organized, 

^'''^'-  'i^ai.^^^^^^-^-'^^^^  of  corporations  for  manu- 

lactu;^^.!-"  niech..ical   .^^  .^^l^S^^ il  ^::^ 

February  17.  ^'^^S,  >t  wasdecla  c    m  ^cct,  „  ^^^^  ^^^^ 

be  lawful  tor  such  compan>  ^l^'\;^2,rlilon  -     This  language  is 
chase  of  .ny  stock  in  any  "  ^cr    orp^)  at^^^^ 

clear  and  -pHcft  -d  -;:;^-^,^^^'ir^.  different  business, 
c.-rporations,  whether  uigagcam  UK  ^^^  ^^  ^^^ 

'"  I'f  ^h"i:S"u^?^S";rM^^-^«53.'chapt^ 
passed  by  th    kp  Luur   0  _  ^^_^J^^  ^^^^.^^^  ^^  ^  ,^,^j^  ^.,^^^^,, 

amendatory  ot  tnc  aei       1  ^^  ',.,,,,,,  „,,.,.  purchase  mines,  manu- 

^s?^::;s:n-r;i;j^^^^^ 

authority  to  purchase  ^^^J^  ^  ^^^  .'^^^..uions  to  purch.se  the 
it  was  competent  Cr  ^'^""'^""""N,.,.  \,.^.  ^o  not  so  read  the  act. 
stock  of  <.her  Sim   .ircon^oiom.  ^^^^  ,,,,,,,,,,,  „ 

Its  evident  obje  t  ^^'^\to  p._m  u  ^    ^^  ^^     ^^^ 

purcha>e  mmes  from  -■^»;  \^^>^^"^  ,^!",n  or  lumber,  which 
^.nufactones  01  raw  "^^^^^/^^^.'^  ;^' j  ..p  into  their  own 
could  furni^h  to  them  materia    to  ''^  ^      ."^^    \  j'  ^^^i,,.  than 

products;  and  in  case  >uch  I'^^t^tlf;  U  i^  u^  "'w  ^  <.ck  -to  the 
their  present  resources  ^^^'f.^''^^^,  therefor."  But  there  i. 
amount  of  the  value  inereof  in  P;^>';^;  ^  ^^  i^;;  ^^,  ^^,,,i,„h,,  t,..m 

>  Thus  in  original.— I'.d. 


I 


The  Holding  Company 


71 


By  section  three  it  was  enacted  that  "It  shall  be  lawful  for  any 
inanuiacturin^  company  heretofore  or  hereafter  organized  under 
tlie  i)rovisions  of  this  act  or  the  act  hereby  amended,  to  hold  stock 
in  the  ca{)ital  of  any  corporation  engaged  in  the  business  of  mining, 
manufacturing  or  transporting  such  materials  as  are  re(|uired  in  the 
prosecution  of  the  business  of  such  company,  so  long  as  they  shall 
furnish  or  transport  such  materials  for  the  use  of  such  company, 
and  for  two  years  thereafter  and  no  longer;  and  the  trustees  of  such 
company  shall  have  the  same  [)ower  with  respect  to  the  purchase  of 
such  ^tock  and  i-sulng  stock  therefor  as  are  now  given  by  law  with 
res|)ect  to  the  purchase  of  mines,  manufactories  and  other  property 
ncc issary  to  the  business  of  manufacturing  companies.  But  the  caj)- 
ilal  stock  of  such  companyshall  not  be  increased  without  the  consent 
of  the  owners  of  two  thirds  of  the  stock,  to  be  obtained  as  provided 
by  sections  twenty-one  and  twenty-two  of  the  act  hereljy  amended." 

riie  object  of  this  act  was  evidently  much  the  same  as  that  of 
ihe  prior  act  of  1853,  that  is,  to  enable  manufacturing  cori)orations 
tu  produce  their  own  ore  and  manufacture  their  own  ra\\  materials. 
'I'll  meet  the  exigencies  of  this  statute  it  is  necessary  that  the  com- 
pany, whose  stuck  is  purchased,  should  at  the  time  of  the  purchase 
be  ergaged  in  the  business  of  mining,  manufacturing  or  transport- 
ing such  materials  as  are  recjuired  in  the  prosecution  of  the  business 
of  the  jnirchasing  company;  and  the  right  is  limited  to  such  time 
a-  tluy  '-hall  furnish  or  transport  such  materials  for  the  use  of  such 
ciinipany,  and  for  two  years  thereafter.  It  clearly  has  no  applica- 
ti(in  to  a  case  where  a  nianufacturing  company  purchases  the  stock 
of  ,111  in-oK  eiu  rival  concern  which  has  ceased  to  do  business,  and 
whii>e  stock  is  bought  for  the  evident  purpose  of  preventing  a 
r' organization,  and  of  obtaining  its  patronage. 

In  the  Revised  T.tatutes  of  \ew  York  of  iSSq,  c.  iS,  vol.  ,^,  p.  1959, 
there  is  also  an  act,  to  which  our  attention  is  called  by  a  supjilemen- 
tal  b'iif,  jieriiiitiing  mai.ufacturing  companies  to  increase  or  dimin- 
'sh  '.heir  capital  stock  to  any  amount  which  may  be  sufficient  and 
projHr  for  the  [)urposes  of  the  coriwration,  and  also  to  extend  their 
business  to  any  other  manufacturing  business  subject  to  the  provi- 
.sion';  of  the  act. 

riiat  neither  of  these  acts  were  intended  to  give  authority  to 
ciirpnrations  to  purchase  stock  of  other  cor{)orations  engaged  in  the 
same  business  is  evident  from  a  subsequent  act  approved  June  7, 
iSoo,  to  take  effect  May  i,  iSqi,  the  fortieth  section  of  which  pro- 
vide  that  ".  .  .  no  corporation  shall  use  any  of  its  funds  in  the 


«■ 


72  INDUSTKI.M     COMniNATlOXS    AND   TurSTS 

•  •  V  .,1-n-  <,ilii'r  (■( ,rn(irat ion,  uiik'SS 

crees  which  ^hall  bt  oi  laimu  tr-msictin"  l)UMne>s  in  this 

thereof.  An>  '.'""\S^  '  ;  '  ^.^  u.rvvin  countries,  may  invest  its 
State,  and  also  in  ..ther  ^''}'^,'^'  ^'^ ^^  ^^^^,,,  on-].. nations  own- 
funds  in  tlu-  stock.  -;'";1:;;;;^^  '  ri  1  V  .ieiul.  Lue  l.een  paid 
ins  lands  m  this  State  ur  "^l^^'^^^;-  \^;  imme.liately  before 

on  such  stocks  -p--^  >,;;  J;  'i\,i^i^di  bnnd^  or  icur'ties 
such  loans  are  made   <>r    1  the  jnt  r  .^.^j^iij,,,  ,1,^11  hv  con- 

i^^;^f:l;u:;;a;^;.;^v":n^ 
s:ira:;di^:;fM:^^^^^^^^ 

.ould  luve.,K.at.   as  ^  ,,.„  ,,e  fact  that 

tVS\hrn;;ta^.ectuntil^terthecontn^^ 

from  the  furtlu.  .act  ^Jf  >  ,X^S^S"Scr  corporations  if 

their  Umsm  the  ^t'-!^  -/'';'      J. ^,.,^,,,,, fore  the  loans  are  made; 
dividends  have  been  paid  tor  thr  c  >   ar.  ^^_ 

or  if  the  interest  on  Ui^r^cun-.^^^^    [^^Inui^  amount  loaned 

curitics  are  wnrth  tuen  >  per  ^^ "^  .^  -  ,      ^  j,,  purchases, 

thereon.     Thi^  act  ^-''-^>;;;:^J';;?,;^. ration  shall  use  its 
since  the  sectmn  ^■M^re-sly  P^'n  '1  ■  ;'  ;  ,  ^^^er 

funds  in.the  P-^'^^- ';,->;  ^l^^i^t      ntecedent  debts. 
"X3;  "^  Unt   i    iSi    ature  of-New  York,  instead  of  repeal- 
The  truth   >.  inai  -.  ,,ri.Mpal  act  of  1S4S,  concerning 

''  ir°c  tir  -.-..ci;'  in  tl„    ;-,'.n.„li,la.c,l  Company,  such  purchase 
was  aJira  iwa  Ihe  KclriscTatinB  Company. 


The  Holding  Company 


73 


GROUP  2 

DIFFF.RENCK  BF.T\\T:EN   THE   TRUST   AND   TirE   UOLDING   COMPANY 

KXIIIRIT    I 

STANDARD  Oil.  CI! ANGI  S  FROM  A  TRUST  TO  A  HOLDING  COMP\NV.' 
I.  On  March  2,  1S92,  a  jud^incnl  was  rcnderal  in  a  -uit  brought 
in  the  Sui)rcme  Court  tif  Ohio  \>y  the  State  of  Ohio  on  the  rehition 
oi  the  Attorney  General,  a^'ainst  llie  Standard  Oil  Co.  (of  Ohio), 
after  liearinf^  upon  Hill  and  Answer.  This  (leci.>ii)n  rendered  it 
inadvisable  to  continue  the  form  of  ori:  nii/.ation  provided  by  the 
Trust  A<:;reenient  for  the  nianafj;ement  -!  the  roninion  pro[)ertics. 
The  certilicate  holders  thereujjon  adopted  the  resolution  set  forth 
on  paires  ()4-5  of  the  Government's  Bill  of  Complaint,  [jrovidin^ 
for  the  dis.-olution  of  the  Trust.  This  resolution  was  adopted  pur- 
suant to  Article  2ist  of  the  Trust  Agreement. 

Up  to  the  time  of  the  adoption  of  the  resfjlution  for  the  disso- 
lution of  the  Tru;-t  in  iS()2,  many  of  the  companies  named  in  the 
Trust  Agreement,  and  most  of  those  organized  or  accjuired  sub- 
sequent to  the  formation  of  the  Trust,  had  continu.'d  as  separate 
corporate  organizations.  At  that  lime  a  great  many  of  tliese  or- 
ganizations which  no  longer  served  any  i)articular  purjwse  were 
dissolved. 


2.  The  stocks  of  a  number  of  important  companies  that  had  been 
hi'ld  by  the  trustees  were  transferred  directly  to  the  Standard 
Oil  Company  (Xew  Jersey)  and  have  ever  >ince  been  held  by  that 
Com])any.  Among  the  stocks  that  have  been  so  held  in  continuous 
owner.-hip  by  the  Standard  Oil  Co.  (Xew  Jer>ey)  are  the  Chcse- 
bmugh  Manufacturing  Conipany,  Continental  Oil  Company, 
Galena  Oil  Works,  Limited,  Signa'l  Oil  Works,  Limited,  Standard 
Oil  Company  (Iowa),  Vacuum  Oil  Company  and  the  Waters- 
Tierce  Oil  Company,  fPct.  Ex.  .5.^  vol.  7,  p.  448). 

v  The  changes  etTectcd  in  the  companies  about  the  time  of 
the  resolution  for  the  dissolution  (^«f  the  Trust  left  in  the  hands  of  the 
Trustees  stock  of  the  following  com[)anie>: 

'  I'nilrd  Slates  of  Ann  rir.i  v.  Standard  Oil  Company  CA'.  /,)  ft  a'.  Hricf  for 
Dcfeivlanli  on  tlic  I-';uls.  In  the  ('ir<iiil  Court  of  the  United  SliUcs  for  the 
Eastern  Division  of  ihe  Easlcm  judiii.il  Uiiirici  of  Mi^.iouri,  Vol.  I,  pii.  y'l-Sj. 


MICROCOPY    RESOLUTION    TEST    CHART 

ANSI  and  ISO  TEST  CHART  No    2 


1.0 


7  8        "W 


I.I 


1.25 


1.4 


I  2.0 
1.8 

1.6 


^     APPLIED  IM/4GE     Inc 


74 


1mH>TKIAI.    foMr.INATIONS    AND   'I'kUSTS 


Anglw-Aiiurican  Oil  Co.  Ltd. 
Atianlic  Rctinint^  Co. 
Buckeye  Pipe  LiiK  Co. 
Eureka  I'ipe  Line  Co. 
Forest  Oil  Co. 
Indiana  rii>e  Line  Co. 
\ational  Transit  Co. 

.vv  York  Transit  Co. 
Northern  I'ipe  Line  Co. 
Northwestern  Ohio  Natural  C.a>  Co. 
Ohio  Oil  Co. 
Solar  Relinin,!^  Co. 
Southern  I'ipe  Line  Co. 
South  Penn  Oil  Co. 
Standard  Oil  Co.     (New  Jersey) 
Standard  Oil  Co.     ( Indiana ^ 
Standard  Oil  Co.     (Kentucky) 
Standard  Oil  Co.     (of  New  \'ork) 
Standard  Oil  Co.     (of  Ohio) 
Union  Tank  Line  Co. 

( )f  the.e  avent  V  <  ompanie.,  onlv  three  antedate  the  Trust  nprec- 

ment^^   SS  ,    oui..  the  Standard  Oil  Co.  (of  Ohio)  .tse  f   the  .\t- 

"  ntie  U  tin!,;.  Co..  all  the  stock  of  which  ha.i  l.een  lu  d    or  tlu- 

;  H,t  of  the  Standard  Oil  stockli-lder.  -nice  t^74.  arnl    he  Na- 

ionil    TranMl    C<..,  which  had  l.een  organized  l>y  Standard  0.1 

e  estsOf  the  remaining  seventeen  conipanKs,  six  were  pipe 

i    .  co.nnanies.  all  of  which  had  Ihh  n  orpani/.ed  and  tlu.r  proper   es 

c  e-i  Tl  V  Standar.l  Oil  interests  for  the  eon.mon  ben.,,    of  the 

cert  1    a^  l''^'  An.lo-American  Oil  Co.   Ltd..  the  >ola 

r  (K;ntucl  v^  the  standard  Oil  Co.  -New  Jer.v).  the  Standard 
0  1  [-of  New  York  and  the  Union  Tank  Lnu'  had  a  1  been  or 
Canizod  h V  the  Stamiard  Oil  trustees,  and  no  one  else  had  ever  he  d 
Siv'^f  their  stock.  Their  ca,.ital  had  been  pau  for  w,th  the  u-n  - 
mn  moneys  of  the  holders  of  ,he  trust  certihcates,  or  u.th  .he 
n  ne  ie.  of  companies  whose  stocks  were  held  by  the  trustees  for 
r  SmlnJ  tL  South  Penn  Oil  Co..  the  (^o  (^  Co  and  e 
Forest  Oil  Co.  were  producinp  companies.  Ihe  first  had  In 
o  Sn  dlv  onjaniml  b v  the  Stan.lan!  Oil  trustees  anrl  a  lanre  part 
J  'h      ropcrt  es  of  the  others  had  been  conveyed  to  them  by  cum- 


I 


'rin:  Holding  Company 


75 


[i;inie;  orpanized  by  the  Standard  Oil  trustees.  The  <iiily  une  of 
the  twenty  companies  of  which  the  Standard  Oil  trustCLS  did  not 
own  the  entire  stock  was  the  Xorthwestern  Ohio  Natural  Gas  Co. 
iDef.  Exhibits  271  &  272,  vol.  iq,  pp.  64,:5-4).  Stocks  of  these 
twenty  companies  were  the  stocks  to  be  distributed  ainon^  the 
holders  of  Standard  Oil  Trusts  certificates,  pursuant  to  the  reso- 
lution of  March,  i8g2. 

4.  The  Trustees  to  liquidate  the  Standard  Oil  Trust  named  in 
the  resoluti(jn  of  March,  iS(jj,  notilied  all  the  certificate  holders  of 
the  proposed  distribution  of  stocks  and  reiiuislKl  them  to  submit 
their  trust  certificates  for  exchanj^e  into  llu  stock  of  the  twenty  com- 
panies. (J.  I).  .Archbold,  vol.  17,  p.  :;;,S4.)  Several  of  the  larger 
holders  of  certificates  at  once  made  the  e\ehan;j;e,  receiving  shares 
and  fractional  shares  in  each  of  the  several  companies,  bearing 
in  each  case  the  same  i)rop,ortion  to  the  amount  of  stocks  in  those 
companies  held  by  trustees  that  the  tru-^t  certilicates  previously 
held  l)y  them  had  borne  to  the  total  amount  of  the  tru>t  certilicates 
outstanding.  The  smaller  certificate  holders  showed  great  reluc- 
tance alxnit  making  the  exchange.  I  J.  1).  .Archbold,  vol.  17,  i)p. 
3,^S4-5).  ...  .      ,       .       , 

5.  The  unity  of  the  business  was  uni\ersally  recogni/i'd.  Stocks 
in  the  separate  companies  had  no  recognized  value,  and  were  not 
bought  or  sold  except  a>  part  tif  the  group  of  stocks  togetlur  repri- 
senting  an  interest  in  the  business  as  a  whole.  The  (( amnion  own- 
ership was  necessarily  recognized  in  the  conduct  of  the  business 
of  the  separate  companies  and  the  entire  business  carried  on  with 
a  view  to  the  interests  of  the  common  owners. 


.  .  .  The  same  people,  in  the  same  relations,  continued.  (J.  D. 
Rockefeller,  vol.  lO,  ji.  :5ioo  ).  ... 

.\fter  the  dissolution,  a'.  1  have  already  stated,  the  election  of 
the  (litTerent  companies  was  !)y  this  stock,  and  the  administr.itinn 
of  its  affairs,  it^  particular  alTairs,  and  the  matter  of  the  .sale  of  its 
imxlucts  was  made  as  before,  I  sui>posc.  Of  course,  in  the  matter 
o|  the  distribution  of  these  product-^  1  li.ive  not  been  concerned 
or  interested  or  taken  any  I'.irt  for  long  years:  l)ut  let  us  take,  for 
example,  the  Standard  Oil  Company  of  Ohio,  of  which  I  had  been 
the  President.  As  a  practical  question  what  would  be  done,  I 
-ui>posc,  would  be  that  the  S.andard  Oil  Company  of  Ohio  would 
Hip[)ly  the  trade  which  it  could  supi)ly  to  the  best  advantage  .  .  . 


76 


Industrial  Combinations  and  Trusts 


I 


,nean  ib.l  tlu.c  pc-plc  ^^  ;'     f  ^  ^^    ;,„t  companies  yet  bed 
an.l  taken  tbor  intere.tMU  ^\y;^';;\V;.  Uu^ir  evklence  of  their 

the  original  lru>l  ^S'-t'''^"^^  ^^V  re  •  U.^  w^s  not  changed.     (J-  D- 
interc.t  in  the  busine..;  that  ^-^'^^'«^;j{,^^^j  ^,,  ,  ,natter  „f  fact 
Rockefeller,  vol.  .0,  p,  M^)^)         >  J  £■  -um'  prople.  wouM  not  be 
the^e  companies  all  beins  owned    >  ^/^    -;"     \,^J  ,,,,.  ^hat  would 
„anauin,  their  sci>arate  'f^"-^^;^  ^,   ,  businc^^es.     (J.  D- 
,,,  the  most  productive  f<.r  all  t'^^■;I;'\';;,,,,,,,  .,f  th<,se  (lifferenl 
K.,ckeleller,  vol.  iC  P-  ,^-O.v  ^^^^^^^  ^,.^,,,1  by  the  stock  hold- 
companies  in  each  ^^^\^^^''  ;^-    !  ,i^,„    ,,,  now.  in  this  common 
in^S  and  those  ^^^^^::^Z.,  .,(  interest  of  the  pa^u. 
ownership.  .  .   •      l"'-rc  '  , he  ureci-e  proportion  ol  all 

concerned;  that  is,  every  man  1-^1^^  y^^    ^J  ,!,  „.ese  trust 
this  business  that  he  had  '  -      "    l^;     ,„  ,,,,in,  one  certiiicate 
certincates  were  cancellul.  ^^  "•  "     .'     ,^i  ^^,,  in^.^c.t  in  each  one 
,o  represent  tlutprc.,..^n.U..U^^^ 
of  those  conipanie>.    (J.  u.  ivolni. 

TENTH.  Upon  the  acquisition  oJ^.^^V^^^/^:; .fachXt- 
panies  by  the  Standard  Oil  C«;"P-"y  ^^^J^^Solder  in  the 
Llderin  the  twenty  companies  became  a  -^^  j^ 

Standard  Oil  Co.  (New  Jersey)  in  me  p^^  ^^.^^  ^^ 

which  he  had  held  stock  in  each  ^^  "^^  7^./^,„_ount  by  the 
in  which  stock  therem  had  been  heia  lor  u 
Trustees. 

.       ,     L     1  the  standard  Oil  Company  (XeNV  Jersey) 

!ro»°:;?a;'r:nrJ'^r°  The  oiu„.i„. .«.  -.. 

ii  bo  treated  as  P'-^'f»'"^''\.^',;;';.j,^„  resolution  was  a.lnptcl  by  the 

On  June  i<).  ^'^'^'^^'j^'/^frXVn        •■  'N'^^  l'^->  '•    '^''^''' 
Hoard  of  Directors  of  the  btandarci  «  ni  v 

vol.  I.  pp.  S.Vf^;     ,  ,  „,  „,-  ,1,,  vice-presidents  and  the  treasurer 


The  Holding  Company  77 

at  the  rate  of  one  share  of  common  >l<)ck  of  this  company  for  the 

f.illnwinK  fractional  shares,  U>  wit: 

Anulo-Amcrican  Oil  Com])any,  Ltd.        -     -     -  26,000  072,300 

The  Atlantic  Refining  Company    -----  50,000  ((72,500 

The  Buckeve  Pipe  Line  Co. 200.000072,500 

Kureka  Pipe  Line  ComDany      - 50,000  972,500 

Forest  Oil  Company  -     -     -     - 55,00007^.500 

Indiana  Pipe  Line  Co.     -     -     - .0,000072,500 

National  Transit  Company        ------  500,104  972.500 

New  York  Transit  Company     ------  50,000  072, 5°° 

Northern  Pipe  Line  Comiianv  ------  10,000  072.500 

The  Northwestern  Ohio  Nat.  Gas  Co.     -     -     -  32.785072,500 

Ohio  Oil  (Vmipanv      .     - 80,000072.500 

The  Solar  Kefinini,'  Co.    -     - S.ooo  072,500 

Southern  Pii)e  Line  Co.    - 50.000072.500 

South  Penn  Oil  Co.     -     - 25,000  .,72.500 

Standard  Oil  Co.  of  Indiana 10,000072.500 

Standard  Oil  Co.  of  Kentucky 10.000072.500 

Standard  Oil  Co.  of  N-  L  preferred  stock    -     -  locooo  072, --,00 

StandardOilCo.  of  N.  V.    -------  70.000072.500 

Standard  Oil  Co.  of  Ohio 35,000  972,500 

I  niun   lank  Line  Company      ------     35,000972,500 

Comwcvi  slihk  of  thr  Sl.nularil  Oil  Company  {.\r:c  J.rsry)  lias 
issued  to  iiH  amomit  cxncllv  cqiuil  to  thr  amount  of  tru^t  ccrtijuatvs 
outsiawliw^  at  the  time  of  the  .lissolulion  of  the  Trust}  '1  he  actual 
exchaniies  of  stock  arc  mI  out  in  detail  in  1  )cl.ndant>  Lxhibit 
;SS  (vol.  19,  p.  S04).  I'rd'  of  the  smaller  Iwldirs  oj  trust  <rrt!Ueales 
exehatii^ed  their  eertiUeates  for  stoek  in  the  t.^enty  companies}  The 
total  number  of  stockholders  in  the  separate  conipanies  never  ex- 
ceeded one  hundred.  (Def.  Kx.3'^'^.vol.  10,  p.  894.)  In  June,  1899 
there  were  still  outsta,.din«  unexchanced  over  300,000  shares  of 
trust  ccrtiticates.     (Pet.  Kx.  250,  vol.  7,  pp.  427  429-) 

After  the  adoption  of  the  resolution  of  June  19,  1S09.  a  metluKl 
was  devised  to  enable  the  small  eertijicate  holders  to  obtain  the  benrjit 
of  the  resolution  uithout  i,oinv,  to  the  trouble  of  actually  themselves  ob- 
tainini^  the  stocks  to  'vhieh  th-ir  trust  eertifu  ates  entitled  them  and  ivhieh, 
under  the  terms  of  the  resolution,  thev  'had  to  have  in  order  to  obtain 
common  ^tork  of  the  Standard  Oil  Co.  (Xeiv  Jersey)}  This  method 
is  described  on  p.  3605,  vol.  17,  of  the  record. 
'  Italics  arc  the  editor's. 


J 


78 


Industrial  Combinations  and  Trusts 


In  the  first  instance  shares  of  the  Standard  Oil  C(..  (New  Jersey) 
^vcre  issued  to  both  Mr.  Roekefeller  and  Mr.  Hagler  and  the  shares 
owned  "bv  them  respectively  in  the  twenty  companies      In   iSgg 
and    cJlcravrJs  various    holders  of  trust  ccrtihcatcs    mrdativcly  smd 
amounts,  to  avoid  the  nuomcnicncc  to  than  o]  converting  such  cert   - 
icates  into  shares  or  fractional  shares  of  the  twenty  ^oyamcsjarthe 
purpose  o(lram(--rring  such  shares  orjraetwnal  shares  to  theSiandad 
Oil  Co.  CXra>  Jersey)  transferred  their  trust  certijicales  to  Mr   ho>k,- 
feller  or  Mr.  Flagler,  and  received  from  them  shares  ojtheStandara  it 
Co   (  Vra'  Jerse^•)  ov^'ned  by  Mr.  Kockejeller  or  by  Mr  llagler,  as  the 
cascmi^ht  be.''  Mr.  Rockefeller  an.l  Mr.  Flagler  lateT  converted 
the  certificates  so  transferred  by  them  into  the  shares  ,.f  the  twentv 
ompanies.  and   then   fansferred   those  shares  to  toe   Standard 
Oil  Co.  (New  Jer.ev)  for  its  shares.    The  exchange  of  stocks  was 
substantially  completed  in  1900.      (Uef.   E.x.  388,  vol.   19,  opp. 

"^'m  holder  of  stock  in  each  of  the  twenty  companies  received  the 
same  proportion  of  the  comm.on  stock  of  the  Standard  Oil  ^"-  '-^'^ 
[frrsey)  that  he  hid  theretofore  held  in  the  stock  of  each  oj  the  twenty 
companies  distributed  by  the  Trustees. 

GROUP  3 

nol.DINr.  COMPANY  LAWS 


Kyi II BIT  I 

STATF.    OF    NFW    JFRSKY  "^ 

1  ;i,'  he  it  enacted.  That  the  dir(Ttors  of  any  company  incorporated 
under  this  act  m.iv  purchase  mines,  maiuifactones  or  other  property 
necessarv  for  their  business,  or  the  stock  of  any  company  or  com- 
panies ownin-.  minin-,  manufacturing  or  i)roducmg  material^, 
!,r  oiher  propertv  necessary  for  th.ir  busines.,  and  '^^"^  r^''^^  '" 
th,  amount  of  i\w  value  thereof  in  i>ayment  therefor,  and  he  stock 
so  issued  shall  be  .leelared  an.l  be  taken  to  be  full-paid  stock  and 
n.,t  liable  to  anv  further  call,  neither  shall  the  holder  thereof  be 
liable  for  any  further  payments  under  any  ot  the  provisions  of  this 
act;  .  .  • 

'  A;'J:ul'u,:'M;S"Legblalurc  „(  .he  State  of  New  Jersey,  :«Ho.  Cha,> 
CCLXV,  Set.  4.  P  414- 


The  Holding  Coiii'AW 


79 


Exhibit  2 
state  of  new  york  ' 

Any  stock  corporation,  domestic  or  forcifjn,  now  cxi>tinfT  or 
hereafter  orij;anized,  except  nionied  corporations,  may  purchase, 
aci|uire,  hold  and  dispose  of  the  stocks,  bonds  and  other  evidences 
(if  indebtedness  of  any  corporation,  domestic  or  foreign,  and  issue 
and  exchange  therefor  its  stock,  bonds  or  other  obhgations  if  author- 
ized so  to  do  by  a  provision  in  the  certilicate  of  incorporation  of 
such  stock  corjioration,  or  in  any  cctiticale  amendatory  thereof 
or  sujiplementary  thereto,  filed  in  i)ursuance  of  law,  or  if  the  cor- 
jioration  whose  stock  is  so  purchased,  acquired,  held  or  disposed 
cf,  i<  engaged  in  a  business  similar  to  that  of  such  stock  corporation, 
or  engaged  in  the  manufacture,  use  or  sale  of  the  i)roi)erty,  or  in  the 
construction  or  operation  of  works  necessary  or  useful  in  the  busi- 
ness of  such  stock  corporation,  or  m  which  or  in  connection  with 
V.  liich  the  manufactured  articles,  [)roduct  or  proi)erty  of  such  stock 
corporation  are  or  may  be  used,  or  is  a  corporation  with  which  such 
sl<jck  cor{X)ration  is  or  may  be  authorized  to  consolidate. 


ExiiiniT  3 

STATE    OF    DELAWARE  ' 

Section  133.  Any  corporation  created  under  the  provisions  of 
this  act  may  purchase,  hold,  sell,  a^^ign,  tran-^fer,  mortgage, 
pledge  or  otherwise  dispose  of,  the  shares  of  the  capital  sto.(  k  i>i,  or 
any  bonds,  securities  or  evidence  of  indebtedness  created  by  any 
otluT  corporation  or  corporations  of  this  State  or  an\-  other  Slate, 
county,  nation  or  government,  and  while  owner  if  said  stock  may 
exercise  all  the  rights,  powers  and  privileges  of  ownership  including 
the  right  to  vote  thereon. 

ExiiiniT  4 

state  of  .maim.  ' 

Section  14.  .Any  corporation  organized  under  chapter  forty- 
eight    of   the   revised    statutes   may   jiurchase,    hold,   sell,   assign, 

'  Laws  of  New  N'ork,  iJ*i?,  (hnp.  fiSS,  Art.  lU.  Scr.  .lo,  p.  T054. 

'  Laws  of  llie  .State  of  Di'lawarc,  iStji),  ("hap.  j;,^,  Siu  .  i,?!.  PP-  50O"S0i- 

'  Law.s  of  till'  Slalc  of  ^Lum■,  njoi,  Chap    Jjg,  Sec.  14,  |).  ^43. 


M 


8o  Industrial  Combinations  and  Trusts 

•,.r    n.ortfr.u'o    i^lcd^e  or  othenvise  dispose  of  the  shares  of 
tran^ier    mortKaj, c    p  cd  e  securities  or  evidences  of  in- 

!  :;"  :^  ma'v'cS'lx. ".ll'Ui  .!«.«.  „..;vcrs  .nd  privileges  of 
ownership,  induding  the  right  lo  vute  thereon. 


^ 

z: 


I 


CHAPTER  VI 
FORMATION   OF  THE    UXITKD    STATES    STEEL    CORPORATION 

NOTE 

It  was  only  after  careful  consideration  that  the  editor  decided 
to  incorporate  in  this  volume  anylliinj^  in  rt<;;a;d  to  the  formation 
of  the  United  States  Steel  Corporation.  His  hetitancy  wa'  due  to 
the  fact  that  the  organization  of  this  concern  has  been  rej)ealedly 
written  up:  by  Bridge  in  his  "Inside  History."  by  Meade  in  liis 
•  Tru.-t  Finance,"  by  Berglund  in  his  "United  States  Steel  Cor- 
poration," and  last,  but  not  least,  by  the  Commissioner  of  Cor- 
liurations  in  his  recent  report.  The  circumstances  iyine;  back  of  the 
formation  of  this  gigantic  corporation  are  therefore  well  known. 
Two  considerations  hnally  led  to  the  insertion  of  an  account  of 
the  organization  of  the  combination.  The  tirst  was  tlie  de- 
sire for  completeness;  the  second,  the  fact  that  a  carelul  perusal 
of  the  sonu'what  conthcting  testimony  before  the  Stanley  Com- 
mittee ap|)eare(l  to  a}Ti)rd  a  more  interesting  story  of  the  consolida- 
tion than  has  a-  yet  appeared,  more  especially  as  it  was  from  the 
lips  of  those  who  were  most  prominent  in  the  matter. — Ed. 

Exhibit  i 

TESTIMONY   OF   JOHN    W.   GATES  ' 

Tlie  Chairman.  The  Umted  States  Steel  Corporation  was 
formed  about  kjoi,  was  it  not? 

Mr.  Gatfs.      iooi;  yes,  sir.     It  started  in  1900  and  finished  in 

The  Chairman.  At  that  time  was  there  any  danger  of  a  second 
<1<  iiioralization  in  prices  on  account  of  the  attitude  of  Mr.  Carnegie 
lov  .ird  the  rest  of  these  concerns.-'  I  believe  up  to  that  time  a  great 
many  of  them  had  been  getting  certain  products  from  him,  and 
manufacturing  certain  products  themselves.  In  other  words,  along 
in  iSqS  or  i8qq  the  Federal  Steel  Co.  had  its  orl)it  or  its  scope  of 
activities  pretty  well  defined,  did  it  not,  and  the  other  companies 

'  Hcuitifis  before  the  Committee  on  Investigation  of  the  United  Stat.  Steel 
Corporation,  Ojnd  Cong.,  jnd  Scss.,  xyii-iyu,  pp.  30-32,  40  and  44. 

81 


d 


82 


Industrial  Combinations  and  Trusts 


i 


in  the  same  way?    Each  had  its  own  sphere  of  operations.-"    They 
(lid  not  impinge  one  upon  the  other  to  any  great  extent? 

Mr.  Gates.    Well,  I  would  have  to  explain  by  making  n  state- 
ment.   Mr.  Morgan,  along  about  iSgg  or  1900.  t)rganized  the  Na- 
tional Tube  Co.  by  the  accjuisition  of  the  stock  of  the  National 
Tulje  Co.,  just  out  of  Pittsburg,  and  the  Riverside  Steel  Co.,  near 
Wheeling,  and  two  or  three  more  tube  concerns,  and  they  were 
making  a  good  deal  of  money  in  the  manufacture  of  tubes.     Mr. 
Carnegie  took  it  into  his  head  that  he  would  build  a  railroad  from 
Lake  Erie  points— from  some  point  on  Lake  Erie  to  his  various 
works  around  Pittsburg— and  that  he  would  also  build  a  tube 
works;  and  he  proposed  to  build  this  tube  works,  if  my  memory 
'^erves'me  aright,  at  Ashtabula,  Ohio,  where  a  great  deal  of  the  ore 
is  unloaded.    Mr.  Hill  and  Mr.  Morgan  had  dined  together— James 
|.  Hill— and  Mr.  Morgan  had  expres>ed  to  Mr.  Hill  the  fear  that 
"if  Carnegie  went  into  the  building  of  railroads  he  would  demoralize 
the  entire  railroad  situation  as  he  had  demoralized  the  steel  situ- 
ation and  that  if  he  built  a  tube  works  at  Ashtal)ula  it  would  result 
in  a  demoralization  of  the  prices  of  tubes.     Mr.  Morgan  had  just 
put   the   National  Tube   Co.   together.     .Vfter  considerable  talk 
between  Mr.  Hill  and  Mr.  Morgan.  Mr.  Hill  suggested  to  Mr. 
Morgan  that  he  talk  to  me.    Mr.  Morgan  said  that  we  were  not 
very  friendly,  and  he  asked  Mr.  Hil'  to  come  over  to  see  me  and  see 
if  I  would  meet  him  and  talk  about  the  situation,  which  I  agreed 
to  do.    I  had  a  talk  with  Morgan,  and  he  asked  me  how  I  would 
suggest  wc  could  stop  Carnegie  from  building  this  railroad  and 
building  this  tube  works;  and  I  told  him  in  my  oi)inion  there  w;is 
only  one  man  to  talk  to  that  had  any  intluence  with  Mr.  Caniegie, 
and  that  was  Charley  Schwab.     He  wanted  to  call  in  Prick.     I 
said,  "If  you  do,  vou'will  never  make  a  trade  with  Mr.  C;\rneg|e." 
Weli,  he  said,  "Will  you  get  Schwab  on  for  a  conference?"  I  saidi 
would.      I  asked  him  where  he  wanted  the  conference,  and  he  said 
he   would   prefer   to   have   it  at   Philadelphia   at    the   Bellevue- 
Stratford  Hotel— no.  the  Bellevue  Hotel.    The  Stratford  was  not 
built.     I  called  Charley  u[)  on  the  telephone  from  New  York  and 
asked  him  if  he  would  come  over  to  Philadeliihia.  and  intimated  to 
him  it  was  something  pretty  important.     He  said  he  would  come 
over  that  night. 

Next  morning  was  very  stormy.  It  snowed  and  blew  and  was 
very  cold,  and  Mr.  Mt)rgan  called  my  mhi  uJ)  and  asked  him  to 
come  over. 


1 


I 


FoKMAiKJN  OF  United  StatI'S  Steel  Corpor.\tion     b^ 

He  went  ovtr,  and  Mr.  Mori^ati  (.'xjilained  to  him  that  he  had  got 
a  severe  cold  and  his  doctor  would  not  let  him  go  out;  that  he  was 
afraid  he  would  catch  more  cold;  and  would  he  go  back  and  get  me 
ti.  arrar.ge  to  have  Schwab  come  on  to  New  York.  My  son  came 
back  and  ri'inirted  to  me,  and  1  called  Mr.  Schwab  up — he  was  at 
the  Bellevue  Ibjtel  at  Philadelphia — and  asked  him  to  come  over. 
He  came  o\er  and  dined  with  me  at  the  Manhattan  Club,  and 
we  went  u[)  to  Mr.  Morgan's  house  about  q  o'clock  in  the  evening. 
We  di^cussed  the  ])ossibility  of  [Xjuring  oil  on  the  troubled  waters 
and  .saving  the  .situation.  I  think  Mr.  Schwab  and  I  stayed  there 
until  about  6  o'clock  the  next  morning.  When  we  left  a  tentative 
plan  had  been  drawn  up  for  the  purjiose  of  getting  the  vario".s 
corporations  into  one  concern.  Judge  Moore,  who  was  in  the 
National  Steel  Co. 

The  Chairm.w.  I  do  not  want  to  interrupt  you,  but  the  one 
concern  to  which  you  referred  was  the  embryonic  United  States 
Steel  Corporation? 

Mr.  CiATi;s.  The  United  States  Steel  Co.  Judge  Moore  and  Mr. 
l"ri(k  felt  very  sore  over  the  Si,ooo,ooo  that  they  had  paid  to 
Carnegie,  for  which  they  got  nothing.  Schwab  stated  that  Mr.  Car- 
negie would  agiee  to  anything  he  would  suggest.  He  pulled  a  letter 
out  of  hi-  pocket  and  showed  it  to  Morgan  and  me,  showing  that  he 
had  a  contra(  t  with  Carnegie  to  pay  him  Si.ooo.ooo  a  year  for  tive 
years.  \\\-  went  on  and  laid  out  the  [)Ian  of  the  United  States  Steel 
Cnrporationwithout  consultation  with  Frick.whowas  a  large  owner. 
Then,  a-^  1  understood  it — but  this  only  hearsay  evidence 

The  Cir AIRMAN.     E.\plain  that  plan  as  you  go  along. 

Mr.  Ci\Ti;s.     It  was  the  plan  that  was  adopted. 

The  Chairman.     That  is,  for  a  holding  company? 

Mr.  Cati.s.  For  a  holding  comi)any.  Judge  Moore  got  hold  of 
Car^egie.  1  \\a^  told,  and  said  to  Carnegie:  "If  you  are  going  to 
take  bon(l<  in  piayment  of  your  property,  make  those  bonds  cover 
the  Xational  Stee!  Co.  as  well  as  your  own."  Now,  Mr.  Carnegie 
demanded  that  of  Morgan,  and  it  enal)led  the  National  Steel  Co., 
in  my  iipinion,  to  get  850,000,000  more  for  their  property  than  it  was 
Worth,  because  Carnegie  would  not  turn  his  over  unless  they  had  a 
mortgage  on  the  National,  and  the  rest  of  us  had  to  sulTer.  That 
is  about  thehistorvof  the  United  Steel. 


The  Ciiair.man.     ^ 


waters  and  relieving  the  situation. 

-itii.ition? 


ou  siioke  about  pouring  oil  on  the  troubled 
What  was  the  trouble  wit*"  the 


■  •"^«?f 


84 


iNDi-sTRiAi.  Combinations  and  Trusts 


Mr.  (.'lATi.s. 


THl'  iruu!)lc  was 


lluit  Canu'^ii 


had  thnati'iu'd  to 


build  tlu'  tuhc  mill  al 
down. 


\^hlabula  and  a  railn: 


id  lo  Haul  hi>  own  ore 


■{hv   ClIAlKMAN. 


Ill' was^oinR  U 


build  a  railroad  lo  come  into 


compt-'tition  wi 
Mr.  C'.An.s. 
that  Mor-zan  had  j 


X\i  ihr  cxi^tmf;  rai 


Iroad 


Vcs;  and  a  tube  plant  to  tear  the 


Ihe  Chairman'-     lie  was  g( 


^l  put  together,  all  to  ] 


)iec( 


nu  to  ,mve 


Morgan 


National  Tube, 
trouble,  both  in 


industry  and  uith  hi-- t-'^'""™' 


his  manufacturuiK  1 

Mr.  CatkS.     Itlooked  that  wa>. 


n  earner.' 


The  Chairman 


And  it 


was 


petition  that  this  tentative  plan  was  drawn  ui 
1^         .     .-   -.    1  (J...*,..  *;*-...   f  oriionition.'^ 


to  obviate  thi>  anticipated  com- 
ihat  afterwards  bc- 


eame 


the 


United  States  Steel  Corporationr 


Mr.  C.  \Ti  s.     Ve 


sir. 


The  Chairma 


s.     How  lonK  was  It 


fDm  the  time  you  got  started 


intil  this  industrial  aec( 


uichemen 


1  actuallvoecurred: 


Mr.  C.ATis 


It  w 


.IS  ()0  da 


V.--,  1  shou 


il  sav. 


r  K>s  — mavbe  40 


day 


We  worked  pretty  fast. 


The  Chairman     There  was  a 


thorough   understandinfz,  1 


■xcept 


as  to  detai 
to  get,  am 


to  the  method  ot  01 


1  of  operation  and  what  each  man  was 


1  what  his  relations  we 


vu  to  be  to  his  le 


ii( 


)ws,  before 


thi 


articles  oi  mcor] 


)ration  were  ever 


drawn  up.  w; 


ihere  not: 


Mr  G\Ti  S      I  think  they  drew  u] 
for  the  United  States  Steel  Corpomti 


the  articles  ot 


I'ori 


on  o 


irisrinallv  lor  Si 0,00c 


then  they  grac 


:iually  extended  it  as  necessity 


arose. 


loraiioii 

and 

■a eh  con- 


cern came  in 


thev  would  increa 


se  a  few  million  or 


hundred  million. 


I 


The  Cii  \iRMAN 


Mr.  Carnegie,  1  believi 


it  S^ 20,000,000  m 


bonds,  di( 


1  he  not.  for  his  propi. 


■rtv— for  the  Carnegie 


C 


o. 


Mr.  C.ATi  s.     He  got  Ss^o.ooo 


Si  00 ,000 ,000 
forfeit. 


or  Sibo,ooo,ooo  the  year  betore. 


(1  at 


and  got  Si, 000,000 


.000  for  what  he  had  otTcrt 


The  Chairman.  1  am  n( 


Was  it  not  competition  an( 

"TSL.lt  wa>  the, hreat  of  Carnegie  to 


Irving  to  get  at  what  was  thr  trouble, 
threatened  competition  between  these 


mild  a 


ail  road  from 


mild  a  tube  i>lant  in 
competition  with  the  Nationa!!  Tube  W^^rks,  which  Morgan  had  just 


Ashlab^la  to  his  work>  at  TiU-burg  and  ,0 

competit 

finished. 


I 


FuRilATIOX    UF    UnITLU    SlATES    STEI^L    ("oRPORATIUX 


«5 


The  Chairman.  Was  not  he  also  threate'iing  to  go  into  the  entire 
iron  and  steel  hu-iiies^ — that  is.  to  compete  with  the  lirici^e  Co.  and 
with  ihe  Steel  Hu.ip  Co.  and  the  Sheet  &  Plate  Co.?  \\a>  he  not 
threatening;  to  dn  all  iho^e  thiiiL'-^? 

Mr.  Gau-.s.  .Mr.  Carnegie  had  heen  in  the  wire  business  and  we 
Ijought  hini  out.  He  put  in  Si, 000,000  and  we  bou.^ht  him  out  l\)r 
halt'  a  million.     |Lau,ij;hter.| 

I'he  Chairman.  Was  he  not  threatening;  to  go  back  into  that 
l)U>ine^s? 

.Mr.  (l\ri:s.  We  never  had  any  fear  of  Carnef^ie. 

Ihe  Chairman.  Mr.  Carnegie  was  also  threatening  to  go  into  the 
tin-plate  bu.-iness,  was  he  not,  at  that  time? 

Mr.  (i\rr,s.  1  guess  he  was  threatening  the  whole  line. 

rile  CiiMKMXN.  He  was  threatening  the  whole  line? 

.Mr.  Catls.  He  was  trying  to  sell  cut,  and  he  bought,  you  see,  at  a 
<;niid  price.     (Laughter.] 

The  Chairman.  .\nd  the  result  of  this  threat  along  the  whole  line 
enabled  him  to  sell  thi.-  ]iroperty  that  he  had  given  an  option  on  at 
$150,000,000  for  about  S500. 000.000? 

.Mr.  CiAHS.  That  is  inference  on  your  [  rt.  The  facts  are  that 
lie  u'ave  an  option  for  Sioo,ooo,ooo  or  Si6o,ooo,ooo  and  got 
S^:o,ooo,ooo  a  little  later. 


Mr.  Br.Ai.i..  The  real  cause  of  complaint  against  Mr.  Carnegie  was 
that  he  would  not  abide  by  the  agreement,  but  would  insi.-.t  on  cut- 
tinu'  the  jirice? 

Mr.  (,>\ii:s.  lie  was  like  a  bull  in  a  china  shop.  He  wouki  get  a 
thinu  into  his  head  once  in  a  while  and  <;o  and  do  absurd  things, 
th.it  I  really  think  he  did  not  think  much  aliout. 

.Mr.  Bkai.i..  Would  those  absurd  things  usually  result  in  reducing 
the  price  of  steel  products? 

Mr.  Gates.  It  might,  or  it  might  advance  them.  Vou  could  not 
till  what  he  would  do. 

Mr.  r.i.Aia..  'I'he  fear  was  that  if  he  carried  out  hi^  plan  there 
«nulil  be  a  competing  line  of  railroad,  as  well  as 

-Mr.  Oaths.  I  can  not  state  it  any  plaintT  than  .Mr.  Morgan  stated 
it  to  Mr.  Schwab  and  me — that  if  Mr.  Carnegie  should  liuild  this 
tube  works  at  .Ashtabula  and  a  railroad  from  .\shtabula  to  his  works 
in  the  Pittsburg  di-^trict  it  would  demoralize  the  whole  situation. 
I  hat  wa>  .Mr.  Morgan's  statement  and  not  mine. 


86 


1nih>ikial  (Omhinations  anu   Trusts 


car  to  ac.;uirin^  the 
if  com- 


ExniBiT  2 

TESTIMONY  OF  KLDERT  H.  GARY' 

Mr.  Littleton.  J.  I'.dwaul  Simmons? 

Mr.  Gary.  \'t  -;  J-  I'l^vard  Simmons.  Mr.  Simmons,  T  think,  at 
thr  rwiuosl  of  Mr.  I'riek,  fj;ave  a  dinner  in  Xcw  York,  and  invited 
?Ir.  Schwab,  Mr.  .Mor-an,  and  various  other  people  to  the  diimer. 
Mr'.  "sch\val)'ma<le  a  little  statement  at  that  dinner  eoneernin^  the 
steel  business  that  made  cjuile  an  imi)res>ion  on  Mr.  Morgan. 
Mr.  VocNi-..  Do  you  remember  what  the  nature  of  that  statement 
wa.>— what  it  related  t.)?  . 

Mr.  Gary.  It  \va>  eoicerninj:!  the  ^reat  ability  of  the  Carncp;ie  Co. 
and  concerning  its  cost  of  production,  concernin};;  its  export  busi- 
ness, which  at  that  I'me,  though  small  from  the  present  standpoint, 
was 'considerable;  and  of  course  1  have  no  doubt  what  Mr.  Si  liwab 
had  in  mind  was  the  idr.i  of  shov  In.i;  iliat  ii  would  be  a  great  thms 
in  »  the  Federal  Steel  should  see  it.-  way  ele. 
Carnecie  Steel  Co.  . 

Mr.'  VovNc.  Did  he  say  anything;  abo^l  the  eondition.- 
petitii)n  in  the  steel  business  at  that  tin 

.Mr  (i\RY.  I  was  not  there,  ami  I  di>  iMt  know  that  he  did.    I  am 
not  sure  about  that.    I  doubt  it.    Hut  the  neM  thin,i,'  !  heanl  about 
it.  one  Sunday  mornin,L,'  early,  Mr.  Robert  Bacon  came  to  my  home. 
Mr.   Yorsc.   Who  was  that? 

Mr.  C,\H\.  Mr.  Robert  Bacon,  who  w,i<  then  a  partner  in  the  lirm 
•  if  I  V.  .Morgan  &  C"o.  then  a  member  of  the  firm— came  to  my 
home  early  Sundav  morning,  and  said  that  the  night  b-fore 
Mr  Schwab  had  surprised  Mr.  Morgan  by  bringing  him  a  letter  fr<  ni 
Mr.  Carnegie  sta'ing  that  he,  Mr.  Carnegie,  would  sell  his  proper- 
ties and  take  his  pav  in  bonds  secured  on  the  proixTties,  as  I  remem- 
ber. He  did  not  sav  anvthing  to  me  alxnit  .Mr.  Gates  having  been 
there  with  Mr.  Schwal)."  I  can  not  deny  that;  I  have  no  knowledge 
on  the  subjeit.but  1  am  \(ry  sure  that  Mr.  Schwab  is  nn'st.iken  m 

hi>  statement. 

Mr.  Young.  You  mean  Mr.  Gates  is  mistakm  m  his  statement. 

Mr.  Gary.  I  mean  Mr.  Gates  is  mistaken  in  his  statement  that 
during  that  night  a  plan  was  formulated  for  the  organization  of  the 

>  Hearings  before  the  rnmmittec  on  Invcslii:;ili<)ii  of  fniiod  St.itcs  Stivl 
Corporation,  fi.Mid  Cone,  ;nd  Scss.  lyn-igi-s,  Pl>-  -205-^11,  2igr2ii. 

'  Thuu  in  original.— EU. 


i 
1^ 


r-JWMATIc.X    or    UXITKD    STATES    S.TCKL    CoKI',  ,!.:aTI(.\      87 

United  Slates  Sled  Corporation.     I  know  that  could  not  be  true 
irom  what  folloue.l.    'Chat  i.,  he  is  mistaken  in  supposing  that  that 
i>  triu;:  lluit  is  what  J  nuan.    1  du  not  know;  I  have  no  know  ledL'e  of 
11.  benig  there.    1  never  heard  of  it  until  1  read  it  in  his  testinionv 
I  1.  not,  to  my  mmd,  important  whether  he  was  there  or  not  but 
think   It  IS  of  some  importance  to  consider  whether  tliev  formu- 
late   that  night,  a  plan  for  the  organi-atiijn  of  the  United  States 
Steel  Corpomtion.    .\nyhow,  Mr.  Bacon  did  not  say  anything  to  me 
about  A  r.  Gates  or  anybody  else.     He  .^implv  had  that  letter  in 
which  Mr.  Carnegie  ottered  t,.  sell  his  properties  and  take  his  pay 
m  boruis.  ^  •' 

Mr.  NuiNi;.  Did  he  fix  any  price  on  them? 
Mr.  G  \Rv.  Yes;  the  price  wa^  fixed;  the  price  aftcr\vards  paid  in 
l-.nd.-,.     Mr.  Bacon  said  Mr.  Morgan  re(|ue>ted  him  to  come  and 
>ec  me  early  in  the  morning  and  present  the  whole  qiu-tion  to  me 
.ind  get  my  opmion  as  to  whether  or  not  it  was  a  practical  busines.s 
proposition  or  not.     Mr.  Bacon  and  I  went  ()\er  the  matter  thor- 
oughly. It  .seems  to  me.  until  lunch  time.     I  think  Mr.  Bacon  then 
went  back  to  Mr.  Morgan  and  came  again  in  the  afternoon  and 
siayed  with  me  until  very  late  that  evening,  going  over  the  matter 
At  that  time,  Irom  the  standi)oint  of  the  Federal  Steel  Co.,  the 
great  necessity  was  for  having  additional  finishing  mills,  and  having 
a  corporation  of  sulficicnt  capital  and  strength  to  be  able  to  in- 
cre.ise  very  materially  its  lines  of  bu>ine>s,  jiarticularlv  its  export 
buMiiess  which  at  that  time  was  comparativelv  small.    .\s  indicated 
in  uhat  r  have  reterred  to  as  a  little  article  I  wrote  lortlu-  World  in 
1000,  f  had  relciTe('  to  this  subject  matter  of  export  busine-s  being 
nmssary,  and  o|  thr  ability  of  a  large  and  rich  corp.iration  to  in- 
crease that  export  i)UMness.  that  being  one  of  the  objects  of  a  large 
combination  ol  capital.     Germany,  for  instance,  at  the  present 
lime  with  a  capacity  of  something  like  g.ooo.ooo  tons  a  year-not 
to  attempt  to  speak  with  strict  accuracv  M'xports  about   50  per 
'    Mt  of  It  to  foreign  countries,  to  neutral  ports  all  over  the  world 
.md  ()lher  foni-n  manufacturers  have  a  large  and  increasing  t  xport 
DUMness.    \\c  had  a  very  small  export  business  in  this  country  of 
s  eel  products,  and  it  was  necessarv  to  ,|,,  sonuthing  to  increase 
that,  to  secure  and  maintain  a  [x.silioii  in  the  trade,  in  our  contest 
lor  a  fair  share  of  forei-n  l)u-iness,  that  is  the  business  that  came 
irom  neutral  ports  :,II  nx,  r  the  world;  and  I  went  into  that  subject 
Y'ry  carefully  with  Mr.  H.u  on  on  that  .lav.  and  tli.re  was  a  good 
'icdl  of  discussion  between  liim  and  nie  in  regard  to  the  price  which 


8S 


IxDisTRiAL  Combinations  and  Tri-sts 


jNIr.  Carncsit-'  a>ki(l  for  his  proptrties.  1  knc-A  Mr.  Carm^ii"  h:ul 
piwn  an  option  uii  liis  iiurnst  in  these  pro()crtics  at  a  nnith  It.-s 
sum,  within  two  years.  1  have  forgotten  the  exact  date.  But  in 
the  meantime  the  values  of  properties  had  very  materially  in- 
creased, particularly  as  to  ore  and  coal  i)ro])erties,  and  the  Carnegie 
Co.  had  shown  by  the  results  of  its  Ijusiness  that  its  earninjj;  capacity 
was  increasing;  very  rapidly,  and  that  therefore  its  properties  were 
much  more  valuable  than  they  were  at  the  time  that  that  option 
was  given. 

Mr.  liARTi.i.TT.  Was  tlic  Carnetjie  Co.  a  corporation  or  a  partner- 
ship? 

.Mr.  Gary.  It  was  a  corporation  at  that  time.  Without  being  cer- 
tain about  the  names,  1  thinl;  the  Carnegie  Co. 

The  CiiMKMAN.  "Limited."  it   was  called? 

Mr.  G\RV.  .\o,  >ir;  the  Carnegie  C"o.,  the  corporation,  took  over 
the  ("arnegie  Steil  Co.  (Lid.),  a  i.artner>hip,  under  the  laws  of  Penn- 
syl\ania,  and  lluit  was  the  owiu  r  of  various  subsidiary  companies. 

1  said  to  Mr.  iiacon,  " There  are  a  good  many  things  to  consider 
al)out  thi>.  If  we  can  complete  a  corjjoralion  that  is  large  enough 
and  rich  enough,  wit'  sulVicient  tinancial  resources,  to  furnish  us 
adecjuate  t'lnishing  mills  and  enable  us  to  increase  our  export  busi- 
ness as  it  ought  to  be  increased,  I  l)elievi'  that  this  pr()[)osition  is  at 
least  worth  considering."  And  it  was  tlien  agreed  ix'tween  us  that 
I  should  meet  Mr.  Morgan  at  his  bank  at  ii  o'clock  on  Monday. 
I  did  meet  him  there,  and  he  and  I  >piiit  some  time  going  o\er  this 
matter,  and  I  evjilained  to  him  in  detail  the  bu>ine»  reasons  for 
entertaining  this  jiropo.-ition,  at  lea>t,  and  t'lnaily  said  to  him,  '"It 
:-eems  to  me.  if  you  ihink  of  this  being  practicable,  we  --hould  start 
from  the  l'"ederal  Steel  Co.,  and  therefore  the  lir-t  thing  to  do  is  to 
call  in  the  i'ederal  Steel  people  who  are  in  the  management ~[)rac- 
tically  in  conlro'— of  this  corfxiration." 

Thereupon  we  telei)honed  fur  Mr.  Norman  H.  lleam,  who  has 
been  here,  and  who  was  one  of  the  directors  of  the  Federal  Steel 
Co.,  who  lived  in  Chicago  but  who  ha|)pened  to  be  in  Xew  York 
that  morning,  as  I  knew,  !)iTause  I  h.ul  a  Utter  from  him  that  morn- 
ing from  Chicago,  and  Mi.  II.  11.  Rogers,  another  director  of  the 
Federal  Steel  Co.,  Mr.  1).  ().  .Mill>,  another  director,  .Mr.  II.  H. 
Porter,  another  director,  and  we  got  into  telephonic  communica- 
tion, through  Mr.  Ream  or  otherwise,  with  .Mr.  .Marshall  Field, 
of  Chicago,  another  diret  tor;  and  when  these  genllemen  cainc  lu- 

'  Thus  in  original. — Kd. 


J 


!"KMAT,.,X    OF    UmI  :  „    StATKS    StK,;l    (■ORI...RATION       89 

P'tluT,  in  my  way  I  att.mpir.l  to  pr.^HU  to  th.ni  tlu'  possibilities 
01  an  or^ramzal.on  that  uould  .cun  to  „,.  to  he  desirable  an      uc 
ccssttt  ,  and  that  would  be  a  ^ood.  fa.r.  bti.iness  proposittcm   aL 

hat  u„u  ,1  meet  what  seemed  to  nK.  to  be  the  uces.>ities  fn  ni 
chc-  standpo.n  ot  the  bu^ine.s  of  manufacturing  and  se  11  n«  r  m 
an  steel  m  th,.  country  in  con,petition  with  the  .ther  co  m  i  s 
..1  the  wor  ,1,  and  .Mr.  .Morgan  suM  t)-at  so  far  a>  he  was  concerned 

a  knew  this  woul.l  .nvolve  imancial  operations  that  were  x    r 
impor  antan.l   very    respoii.sible,    and    anvone  mi.du  he-itate    n 
regard  to  ,t,  ai,d  yet  if  we  gentlemen  reaclud  the  a.nclusi  m  th 
It  ^  as  a  good  bu.s,ness  proposition  an.l  perfectly  proper  and     ■  , 
and  rehable  from  a  business  standpoint  and  every  ot'her     a    '  1  ■ 
^^oud  con.Mder  actmg  as  the  „n;nuial  sponsor  or  manau.   V,f    . 

Mile    here  \\  as  some  oppo,..tion-a  considerable  opposition  in  the 
a>snitt(l,  and  that  is  where  we  started. 

•  -"^'r  ^'"f^^u^''  '}-^  I''''^  ^'''''•'  ''■''"  ^'"ything  contemplated  ,  xnnt  the 
jomder  of  the  Ledera!  Steel  Co.  and  the  Carnegie  Co.?  , 

grown  any  larger.-'  ^  '  '^ 

it  ^  V' ,H  !n '■  /.'  '''"'  ■"■■*'''"  '"  ^^''  conversation,  yes;  no  doubt  about 
t      \  ariou>  othcT  companies  v.cre  mentioned,  particularlv  the  Wire 
(  o.    the   lube  Co.    and  the  liri.ige  Co..  an.l  later  the  Xationu 
.StelCo     beca.Kc  I  believe  it  i.  true  that    .Mr.  Carnegie  insis  U^j 

■::  Mr  ^:^:^'"!^'^\S^'  ^•-■;'  ''>V"'luired.  I  never  kncVun^^I  I 
nil  Mr.  Uite>  s  testimony  that  that  n...  tlie  reMilt  of  .Mr.  .Mo.,re 
I       v        •    ■■•  ^Vr^''  ^""^  ^"^'«-'ing  that.     That   n-,av  b      rt  e 

iKUe  no  knowledge  on  the  subject,  but   !  ,|o  remembVr,  duri  g 

wl^^'-ken  ■;?•       """  ''"  -'"^--^-"-  I'-t  the  Xatio.ial  sS 

.Mr.  n\RY.  Ves;  he  was  the  dominant  laU..r  there.     There  wi^  1 
group  o    men  consisting  of  .Mr.  Moore,  Mr.  Keid,  an.l  .Mr   I    ed. 

nc  I  in  1  late  Co..  the  .\mtrican  .Sheet  Steel  C<...  and  the  .An  ericin 

;  Imeal  fr:  '''  ^"'"'V'  "^"^  -ay  h^Ae  been  aiuullK 
Cke  el  cro  .;'"'::''''"•  '"*'''  ''"''  '^''  ^onsi.Ieration  of  the 

uasist   "h^,?h'  '""^  ':^'''  ^^-^^^attacheel.     The  first  propc.iiion 

ich  should  Z  ""  '"•'  "?''''  r^'^'"'''^^' ''  ^'""P'^'^^  corporation 

'UCb  should  be  self-contained,  wjiich  should  be  in  a  po  iti.,,,  to 


'rl 


J 


90 


Indisikiai.  Comiuxations  and  Tkists 


opiTale  at  the  lowest  cost  of  production,  and  which  would  have 
sufficient  fini>hin,!;  mills  and  sulTicicnt  capital  to  he  able  to  coni[ieto 
with  other  manufacturers  tiirou^hout  the  world. 

It  was  on  that  basis  we  started  thi^  orj^ani-iatiun;  it  was  un  that 
basis  we   coni[)leted   it. 


It  has  been  suggested  here,  and  with  reason,  based  on  facts,  that 
there  was  some  comi)etition  between  some  of  the  companies  \vhich 
were  taken  into  the  United  Statc'^  Steel  (V>rporation.  There  is  no 
elTort  whatever  to  get  away  fron\  tin-  exact  facts  in  regard  to  that, 
and  I  will  be  glad  to  give  you— 1  think  1  can  give  you  pretty  accu- 
rately—just  what  that  competition  was;  init,  compared  with  the 
whole  i)roposition  taken  u\)  at  that  time,  there  was  comparatively 
little  comi)aition  between  the  different  companies  th.at  went  into 
the  United  States  Steel  Corporation,  as  I  understand  it,  and  in  my 
opinion,  from  my  viewpoint. 

The  Carnegie  Steel  Co.  and  the  Illinois  Steel  Co.  were  in  compe- 
tition in  the  manufacture  of  rails,  one  located  at  Pittsburg  and  the 
other  at  Chicago,  the  territories  being  quite  remotely  situated. 
The  Carnegie  mills  largely  supplied  a  territory  which^was  not  >up- 
pHed  by  ihe  Illinois  Steel  Co.,  and  the  Illinois  Steel  Co.  a  territory 
which  was  not  supplied  to  any  extent— to  any  large  extent— by  the 
Carnegie  Co. 

Then  in  plate  to  some  extent  the  same  applies  between  the 
Carnegie  Co.  and  the  Federal  Steel  Co.,  th.at  is,  through  sub-idiary 
companies  (jf  the  Federal  Steel  (-o.  I  will  give  you  tl'.at  a  little 
more  completely  later,  if  you  will  allow  me.  because  I  do  not  want 
to  disguise  or  mininii/e  what  that  competition  was  l>ut  in  niy  opin- 
ion the  competitive  feature  aiiplicable  to  thcM'  difierenl  mmiKinies 
was  incidental.  It  was  not  the  princii)al  factor,  not  the  important 
factor;  certainly  it  was  not  so  consiilered  by  me,  not  so  stated,  and 
not  in  our  minds  at  that  time;  and  in  saying  th.it  I  do  not  want  to 
mir.imize  the  fact  that  there  was  competition,  and  I  would  be  glad 
to  give  that  to  you  exactly  as  it  existed. 

Mr.  YorNc.  We  would  be  very  glad  to  liave  it. 
Mr.  Gary.  I  have  not  undertaken  to  say  anything  al)out  thepre- 
vii)us  organizations  of  these  subsidiary  companies,  and  I  am  not 
trying  to  conceal  that,  at  all.  I  have  little  knowledge  in  regard  to 
them,  except  as  to  the  I'Vderal  Steel.  1  did  know,  however,  becau-c 
I  had  been  somewhat  connected  with  it  at  an  earlier  day,  that  the 


/5 


Formation-  or  U>,rn;i)  Statks  Stf.fi.  ("or 


POP.ATIOX      ()i 


\\  ire  •-  ■>.  had  put  to.^cthcr  some  wire  companies  which  were  in  com- 
lHiiiin:i      I  hat  we  had  nothing  to  do  with.    \Vc  took  the  Wire  Co 
;nul  all  these  other  comj)anies  a.s  we  found  them  at  the  time     I  did 
not  know  anything  about  the  Tube  Co.  and  I  did  not  know  anv- 

«th.nK about  the  J5rid-e  Co.  .Mr.  R„l,erts  ishere,  and  hecan  tell  you 
all  about  the  Bridge  Co.,  and  others  can  tell  you  all  about  the  oth(  r 
companies.  I  knew  little  about  them,  and  I  doubt  whether  Mr 
Morgan  knew  much  about  them.  He  had,  though,  in  the  wav  ol 
tmancmg  or  representing  syndicates,  i  l,dieNe,  some  relation  with 
the  lube  ( o.  and  with  tlu   Bridge  Co. 

It  ha<  been  .stated  during  this  investigation,  I  think,  that  there 
were  threats  on  the  part  of  Mr.  Carnegie  to  buil.l  a  tube  mill,  and 
that  was  an  important  factor.  If  that  i^  so,  I  did  not  know  of  that 
1  did  not  hear  of  that,  and  I  have  no  comments  to  make  about  it' 
It  certainly  was  not  spoken  of  in  our  deiroerations.  I  had  hea'-<i 
that  Mr.  Carnegie  was  considering— had  said  something  about— 
bin  d.ni:  a  railroad  from  Pitt>burg  to  New  ^'ork,  and  that  had  dis- 
turbed the  Pennsylvania  Railroad  peoi>le.  I  h.id  no  knowledge  on 
that  subject.  I  do  not  remember  to  have  heard  it  referred  to  at 
that  time. 

Mr,    \or.N(„    Von    are   sure   you    heard   no    convcr.satioi.    by 
Mr.  Morgan  in  regard  to  that  railroad  Jiroposition? 

Mr.  Gakv.  I  do  not  remember  to  have  heard  anvthing  about  it 
but  I  do  not  .say  that  he  di.l  not  speak  about  it.    Of  course  others 
might  correct  me.    I  had  heard.  I  know,  that  Mr.  Carnegie  talked 
of  building  a  railroad  from  Pittsburg  to  Xew  ^•^rk  because  he  g,,t 
into  some  altercation  with  the  P.nnsvlvania  Railroad  Co.  in  regard 
to  freights  from  Pittsburg  to  Xew  ^•ork.     Hut  1  have  heard  a  great 
deal-1  have  seen  more  or  le-;  in  tlu  newspajiers— about  a  de^^ire 
a  disposition,  to  eliminate  .Mr.  CarncLrie,  .m,]  all  that.     I  do  not 
know.    Mr.  Carnegie  was  no  doubt  an.xious  to  sell  his  properties 
at  what  he  then  considered  was  a  good  price  and  what  he  now  (.in- 
siders was  a  very  small  price,  as  he  has  stated  reinatedh  ami  with 
empha.^is.  and  we  were  desirous  of  securing  the  Carnegii'  properties 
and  the  other  properties  for  the  reasons  I  i.ave  gi\ei,,  and  we  se- 
-.^        cured  them  at  the  best  prices  obtainable,  everv  <.ne  of  them.     If  we 
1        paid  too  much,  it  was  because  we  could  not  help  our.-elves;  we  could 
not  gel  thim  without.     I  was  in  very  close  connection  witii  this 
.       pmposition  from  the  beginning,  as  I  have  stated,  until  the  corpora- 
^       turn  w.-s  organized,  being  at  .Morgan's  everv  dav  a  part  of  lli-'  day 
and  with  the  counsel  in  the  case  another  part  of  most  of  the  days 


g2  INDISTRIAI     CoMHlNATIONS    AND    TRrSTS 

When  it  came  lo  accidinj^  u,H,n  th.  f>.rm.>f  cmjanizalu.n,  the  ckuUT. 

Mr   Bartleit.  May  I  ask  you  a  ciuc.tion  therc.^     Ih.^  nnu.-  m 
iqoi,  was  il.-' 

m"  U.^Kn.,';V"u\h.  tinu.  of  the  formation  of  the  Federal  Steel 

%r   GXHV    \o.  no;  the  United  States  Steel      The  Federal  Steel 
wai  orianli;!  in  the  sunnn.r  oi  x.oS.     I  think  U  - [u-d    -  < 
thro<.  months'  work-about  three  months    work -before  ^^c  com 
mencc^olKHUions;  or.  at  lea^t.  the  con.vny  wa.  en.barked  about 

"  M^- Vu.^ -^^Wl;  ut;U.  ■  .hat  tin-  threat  wa.  abroad,  or  ..^^ 
p.'l  d  !,r  -uioal.  that  M  r.  Carmgie  w..>  t.  build  tln>  tube  works  and 

'^irl^R!-    ludue  Hartlet,,  1  never  h.aM  anythin,  about  the  tube 
work^   and  I  do  not  know  anytlunji  about  that. 

Mr '      KTiK  rr.  1  ti..cl  in  Mr.  Sehwab-s  tr.tuiiony  In^Um.  tlu.  \V  av  . 

and   Means  Committee  in   looS.  the  followm,  on   that  .ubje.t. 

M,  (•„,  KHVX.  An,l  in  xoo.  when  '1-- -f  - --^^^ir  llu.''!^  u.lS 
there  would  he  M,n>e  ...mpeimon  ihrou.h  ^^^^^^'^^^^^l^Z^Mailon  in 

snt:':^x^:^rj^:i  ^z  sri  ;he  ..Hce  .......^ ...  .„.. 

.Mr.  SeiiWAB.  Quite  correct. 

That  i^  frou',  Mr  S.  hwabV  Ir.timony  before  the  Way-  and  Mc-ans 

'^' Mr '(!^K;  1  want  to  .av  thi-  1  b.lievc,  so  far  e.  the  business 
...fh^ir  animation  of  the  Umted  States  Steel  ^  "H-a Uon  .- 
o-necrncd.  that  1  am  a^  familiar  a.  ^''iv^-  -'  '  '  ,  ,'  '^  j, 
hui  more  to  do  with  that  propoMtion  than  anync  el-.  1  th  ik 
M  Morean  relied  u,>on  me  to  a  large  extent  with  refen.u  e  to  th 
bJ^^itu^  l^;i  o,  it.  and  tin.  question  t,f  a  tube  company. ..  ,roposeJ 
.  Dates  thus  in  original.    Should  be  i8g8,  the  year  the  Federal  Steel  Co.  wa. 

formed.— I'.'l. 

''  Dale  in  error.— Ed. 


I 


I 


Foi 


ATifJX  OF  Unitkd  States  Stkfl  Corporation- 


93 

tube  mills  by  Mr.  Carnegie,  did  not  enter  into  llic  calculations  m, 
far  a-  [  know.  I  can  not  say  what  was  in  Mr.  Carnc-ic'.-.  mind'  or 
m  the  minds  of  others. 

Mr.  U  vKi  i.i  IT.  On  pa^c  1O41  of  the  same  hearing  before  the  Wav.s 
and  Means  Committee,  Mr.  .Schwab  testilied  as  follows: 

Mr.  Scnw.M).  The  consolidation,  as  vou  term  it,  of  the  steel  eorpo.-ations  in 
atjout  the  year  iqoi  came  about  in  this  w;iy; 

NIr.  -Mor^Mn  askejl  me  if  Mr.  Carnc^-ie  wante  1  to  .sell  his  interests  in  iron  and 
steel;  tliat  lie  then  had  larRC  mterests  in  the  Federal  and  other  companie-  I 
approached  .Mr.  Carnegie,  and  Mr.  Carn-qie  said  he  would  sell,  and  we  iold 
ouruimpany  to  Mr.  Mor-an,  under  condit.oas  with  which  vou  arc  all  familiar 
We  knew  the  properties  Mr.  Mor^-an  controlled  and  uiKin  w'hich  he  wa<  to  mve 
u.-,  a  mortgage  bond,  and  that  is  all  there  was  to  it. 

Mr.  C. AKV.  I,  of  course,  can  not  speak  for  anyone  else  but  myself. 
[  have  fiiven  my  recollection  of  the  facts  leading  up  to  and  resiiltinff 
m  the  t'ormation  of  the  United  .States  Steel  Cor[)oration.  from  my 
standi)nuit ,  and  from  my  own  connection  and  knowlediie.  I  can  not 
speak  for  others.  I  do  not  know  what  was  m  their  minds.  I  oilly 
know  of  my  connection. 


i 


Mr.  \(ii-\(;.  \ow,  you  will  remember  when  wo  adjourned  last 
nisht  VdU  were  ju-t  starting  to  make  a  statement  of  the  competition 
which  existed  bctwien  the  ditTerent  units  of  the  United  States  Steel 
C-irporatii  1  bi'iore  tiny  were  consolichited  into  tha*  company. 
rii.i-r  proiced   with    thtit. 

.Mr.  (;.\RV.  The  C.trncLiie  Steel  Co.,  the  subsidiary  conii)anies  of 
the  I'ederal  Steel  Co.,  the  .\merican  Steel  [loo]>  Co.,  and  the  Xa- 
tional  Steel  Co.  W(  re  to  some  I'xtent  in  coniniiiii.iti.  The  four  com- 
ixmies  were  nut  lompetitive  with  one  another  on  all  the  lines  of  the 
pnuluction  <.l  the  respective  conijKinies.  The  pnatcr  [lart  of  the 
National  Steel  Co.'s  product  was  billets  and  sheet  bars  and  were 
sold  to  the  .\merican  Tin  Plate  and  .lUn  to  the  Sheet  Steel  Co.  I 
thought  I  could  f,MVc  you  n..w  the  lu-rccnta-c  perha!)s  of  the  com- 
petition, but  I  can  not  do  that  without  further  in.;uiry. 

The  .\meric;in  Wire  &  Steel  Co.,  the  xXational  Tub'e  Co.,  the 
American  Tiii  Plate  Co.,  the  American  Sheet  Ste<■l(^).,  the  Ameri- 
can Bridge  Co..  and  the  Lake  Sui)eri..r  (^l^^oiidaled  Iron  .Mines 
Were  not  in  C(mij>etition  with  one  another  or  with  the  other  corn- 
panics.     When  we  commencetl  business 


94 


Industrial  Combinations  \ni)  Trusts 


Mr  Young  (inlcrpo>ine>.  BfUTo  you  ^<>  -n  \vilh  that,  will  you 
..  I'-e  what  were  the  articles  manulactur.el  1-y  these  a.irpanies  in 
the  lir^t  -r:.uir,  what  comi)etin-  company  dul  co'Tipete.' 

Mr  GVKV.  I  stat.d  that  the  other  day  aln.ut  a^  tully  as  I  can.  I 
would  sav  that  the  princiinil  competition  was  between  the  Illinois 
Steel  Co.' and  the  Carne-ie  Co.  in  the  sense  of  making  the  same 
•    tides  or  some  of  the  same  articles;  they  were  substantially  in  com- 

tition.  I  do  not  wish  to  minimize  that.  That  is  true  m  the  manu- 
Lcture  of  rails  particularly.  So  far  as  product.^  are  concerned,  they 
were  in  substantial  competition,  and  1  would  say  tliat  those  were 

'"CSr'arvou  know,  the  freight  rates  from  Pitt^bur,  to  Chi- 
cago are  (luite  lar^e  and  1  believe  at  that  time  were  in  the  neif^hbor- 
hood  of  S    per  ton.    The  market  of  the  Illinois  Steel  Co  wa.  in    he 
.real  and  growing  West  largely.    That  is.  they  supp  led  lar<:ely  the 
western  railroads  who  had  terminals  in  Chica-o  and  of  course  they 
did   to  some  extent,  furnish  rail>  to  railroad>  which  came  froni  the 
Fast  and  had  their  terminals  in  Chica.izo.  but  the  _C  arnc-ie  Ste, 
Co  in  turn  had  a  natural  market  whic  h  .urrounded  Us  plant— that 
is  the  railroads  havin-  terminal,  in  Pittsburg-an-    when  you  con- 
sider the  respective  territorv  or  held,  of  the  two,  there  was  not  so 
much  comi,etition  as  it  w.uiUl  appear,  allhouirh  it  is  the  tact  th.it 
the  Carne-'ie  C'o.  -lid  in  time  come  into  the  western  lieUl  and  int.) 
territories  which  were  not  conlr.>lled  to  the  extent  at  that  time^at 
lea^t  of  selling  rail-.  1  believe,  as  low  as  Sio  a  ton.  at  a  time  when 
the  Illinois  Steel  Co.  was  considering  goi  i-  mto  the  hands  ol  a 
receiver  and  came  very  near  it.    It  did  not  pay  any  dn.denas,  .so 
far  as  I  know,  and  I  believe  it  did  not  i)ay  any  dividends  at  a.l, 

up  to  iSoo  ,      T-    1      1  Ci     1  /■- 

Mr.  BARTI.ETV.  Right  there.    When  was  the  lederal  Steel  Co. 

formed? 

Mr.  Gary.  In  iSoS.  ,      ,     ,    ,    .       ,• 

I  believe  perhai)s,  if  unrest ricte<l  and  unchecked  de-^tructiyc 
competition  had  gone  on  the  Illinois  Steel  Co.  would  undoubtedly 
have  been  driven  out  of  businos  and.  juThaps.  I  might  say  more. 
I  .lo  not  siv  it  witli  a  view  of  casting  any  rellection  upon  anyone  ^ 
management,  but  it  i.  not  at  all  certain  that  if  the  old  management 
or  the^mana-'ement  whi.'h  was  in  force  al  one  time  had  continue.i, 
the  (\irne-ie  Co.  w>  ■iM  not  have  driven  entirely  out  of  businc>ss 
cviTV  steel  <-ompanv  in  the  United  States.  l\--haiv.  you  are  sutti- 
ciently  familiar  with  the  facts  to  determine  whether  that  i:,  a  justi- 


I 


.ifl 


I-uKMATION-    OK    UxiTED    STATES    StEEL    CORPORATION      95 

ficd  statomont,  but  certainly  that  is  tlir  opinion  of  a  great  many 
<lillerent  \m^,k:  notwithstanding  con.h'ti.ms  had  improved  after 
tlir  I-ederal  Steel  C.i.  was  lornied  and  evervi.ne  was  petting  on  a 
Letter  basis  and  we  had  reached  the  point  w  here  we  saw  it  was  i)os- 
sihlc  to  organize  a  company  which  would  be  self-contained  and 
which  would,  as  1  have  said,  secure  a  very  large  proportion  of  the 
export  business. 

Exhibit  3 

TKSTIilOW   OF    CIIAS.    M.    SCinVAB' 

The  Chairman.  Tell  us  who  sat  next  to  you. 

.Mr.  .ScHW.M-;.  Mr.  .\b>rgan  sat  next  to  me  on  mv  right  and  Mr 
Simmons  at  my  lelt.  There  were  distinizuished  nu'n  of  New  York 
present— Mr.  Harriman,  Mr.  Morton,  .Mr.  Carnegie,  Mr.  Phipps 
and  a  great  number— 70  or  80.  The  names  are  probably  aNailable' 
!!  you  would  like  to  have  them.  I  went  home  from  that  dinner  to 
l':;t-burg.  and  thought  no  mure  about  the  matter  for  some  time 
''::<•  day  I  had  a  t.kphone  call  from  Mr.  John  Gate.-,  from  New 
N^rk,  a  long  distance  call,  who  a>ked   me  if  I  would  meet  Mr 

>■-''"  '"  Philadelphia   the  following  day.     I  told   him   that  I 

would  I  wrnt  to  Philadelphia,  and  Mr.  Gates  telephoned  that 
Mr.  .Mor-an  was  ill,  and  so  I  met  Mr.  Morgan  at  his  house  in 
^(■w  \nrk  I  think,  the  day  following,  or  probably  the  same  day. 
\try  -hiirtly,  at  any  rate. 

Mr.  -Morgan  then  aslad  me  to  go  over  with  him  again  in  more  de- 
tail the  .subst:!-  re  of  what  I  had  talked  about  at  the  dinner,  and  we 
.'^IK'nt  several  hours  in  (k)ing  so.  There  were  other  gentlemen  pres- 
ent at  that  meeting,  and  the  whole  matter  was  discus.sed  most 
thoroughly  trom  the  point  of  view  that  I  have  spoken  of  at  that 
interview. 

The  Ch\irm\n.  \\,u  were  the  only  speaker  at  that  dinner? 

.Mr.  ScirwAH.  I  was. 

The  Chairman-.  .\nd  you  spoke  for  an  hour  or  so? 

-Mr.  ScmvAn.  I  would  say  .so;  ves,  sir. 
_ The  Ch.ukm AN.  And  .Mr.  .Sinrgan  requt'.tcd  that  you  go  over  with 
him  again  in  detail  fully  all  the  arguments  that  you  had  made  at  the 
I'rcvious  dinner? 

Mr.  ScHWAH.  I  will   not  say  arguments— statements  of  fact, 
statements  of  opinion,  rather;  quite  so.    Then,  of  course,  he  asked 

D.,rSn"?'^  Yr'""  ^''^  Cornmif  ccon  InvcstiKalion  of  Unitcrl  States  Steel  Cor- 
Jx>rdiKm,  02ncl  Cong.,  .'nd  Scss.,  i.^i  i-i;ij,  jip.  127.S-79,  1,511 -.4. 


!■»      -irf 


0  iNDfSTRIAI.   CoMIilN-ATIONS   AND   TuU^Tl. 

1   .,t  it    'ind  tinallv  -ai^l  t<>  mc.  within  a  day  or  so, 

Mr.   SnnvAU.    I  he  hlccl   ^'"^l""^'^;"  "    ,_  Carnmir  at  wliich  he 
He  asked  me  if  I  couk  ,et  a  i.rue   re       .    r  C  r     Mc      ^^.^^  ^^^^ 

would  sell  his  v.orks.  1  had  not  ^;'^^  ;.  ^  \;\,,  ^^.  Morgan. 
Carnegie  at  all  had  ^V^^;}':^-,^^'^  ^J^  ."with  Mr.  CarnJ^ie, 
In  the  eour.e  ot  a  week  or  so,  H,™Ydd  tell  him  what  1  had  said 
.  favorable  opportumtv  ^l'"";-!; ^^  ^^  :^  .^  ^  ,  ^ge  and  with  his 
to  Mr.  Morgan,  and  f  l^''' ^''l.  ■^'\-  ;  ".^'Vh  u  ho  ought  to  sell  his 
de>ire  in  life,  phi  anthrop.c  in  ^  ^^^^^  .^  ;•,,  i\^^  J\\,  ^e     It  was  with 

"Tht'clulRNf.s.  \V.«  t^horc  any  concern  on  the  part  of  the  pur- 
chasers as  to  the  I'""'  .  .     [        \(,  M,„^;an^vastocetap^ice 

,rM;:'Sn;ej':;;t^^hfi£;^c.-.  seeing 

,„  ,,„^,.,.., he  property         «o^_P^^^^^ 

took  It  to  Mr.  M.  r  an     nu      >  ,,„,l,al,le  earnn,^,  ami  sa 

;;:rTt;;r::;.hin:;  ?ur,h« '«!)„  .Ith'the  organisation  of  the 
United  Slates  Steel  Corporation. 


I 


Mr  B  XKTU-.TT.  The  consolidation,  as  I  understand,  of  the  United 
States  Steel  Corporation  was  about   looi. 

\U  B^I^TT.  rS;/u;  the  consolidation,  there  wercnot^only 
rumors  Imt  a  purpose  on  the  part  of  the  Carnegie  Steel  Co.  to  a 
tend  its  business  in  building  tube  works:* 


I 


4 


Forma  rioN  of  United  States  Steel  Corpor.\tio\ 


97 


Mr.  SrnwAH.  There  has  been  a  report  current  that  the  Carnegie 
Steel  Co.  threatened  to  extend  into  the  line  of  tubes  i)rior  to  the 
formation  of  the  United  States  Steel  Corporation,  and  that  that  had 
something  to  do  with  the  formation  of  the  United  States  Steel  Cor- 
poration. 1  want  to  say  that  the  Carnegie  Steel  Co.'s  intention  to 
extend  their  lines  into  tubes  was  the  same  y)ractice  that  they  had 
followed  in  all  their  nianufailuring,  which  was  to  gradually  extend 
their  lines  of  manufacture  into  different  articles.  That  is  what  we 
intended  to  do  in  tubes,  and  there  was  no  threat  or  menace  or  any- 
thing regarding  it. 

Mr.  Bartmit.  Except  the  publication  in  the  newspapers  that 
tliey  intended  to  do  so? 

Mr.  ScuwAi!.  I  do  not  know  whether  it  was  published  at  that 
time,  or  after  the  formation  of  the  United  States  Steel  Corporation. 

The  CilAiRMAX.  Was  that  not  the  statement  of  Mr.  Carnegie, 
mentioned  by  Mr.  Gates,  that  he  was  going  to  put  up  a  tube  mill  on 
Lake  Erie 

.Mr.  Schwab  (interrupting).  At  Conncaut. 

The  CiiAiRMA.\.  That  is  on  the  line  of  the  Lake  Erie  &  Bessemer 
road? 

Mr.  Schwab.  Yes,  sir. 

The  Chairman.  Did  not  that  disturb  very  vitally  the  tube  com- 
pany? 

Mr.  Schwab.  Well,  if  it  did.  I  did  not  know.  I  knew  Mr.  Con- 
verse and  other  people  connected  with  the  tube  industry'.  I  visited 
their  works  at  the  time.  I  prepared  the  plans  for  the  works  at 
Conneaut,  ;ind  from  all  I  knew  of  their  feelings,  they  were  ni  seri- 
ously alarmed  at  our  going  into  the  tube  business.  They  felt  that  it 
was  inevitable  that  the  company  should  do  so. 

The  Chairman.  Is  Mr.  Converge  a  man  who  would  be  seriously 
alarmed  unless  there  was  something  seriously  alarming? 

Mr.  Schwab.    He  is  very  reliable. 

The  Chairman.  He  is  a  man  like  most  ;d!  the  ironmasters — a  man 
of  good  nerve,  fine  business  sense  and  courage? 

Mr.    Schwab.  He  is. 

The  Chairman.  .\nd  if  he  or  his  company  were  alarmed  they 
would  be  apt  to  have  some  reason? 

Mr.  Schwab.  I  think  so. 

The  Chairman.  I  want  to  call  your  attention  to  an  excerpt  of  the 
minutes  of  the  National  Tube  Co.,  dated  January  15,  1901.  That 
was  about  the  time? 


h^ 


-2  - 

,'f    IB 


si 


98 


Industrial  Combinations  and  Trusts 


Mr.  ScuwAB.  I  think  so.  \UrVi^c  the 

•ihc  Cii  \iRM\N.  1  quote  from  a  copy  made  by  Mr.  MacKae  tne 

acaumLnt'ir  the  clmnnttee,  .,>iecl  by  hin.  -;•-;;-;;>:  '^ 

from  the  mhmte.  of  the  Xat.onal    I  ube  C  o.     He    si  bchcNC,  the 

prescient  of  the  Cerliiied  Aceuuntants  cl  New  \  ork. 

Hook  marked  "Xo.  ..-  Xalion.i  Tube  Co.,  from  January  15.  iQOi,  to  date, 
tontaining  all  minutes  oi  said  company. 

Here,  under  thi>  date,  1  find  this  entry: 

...       M,.  r,^r,^■f■^QP  cnid  that  there  were  rumors 

eapaeity  of  280,000  tons  per  annum. 

Was  that  about  the  size  of  the  anticipated  tube  works? 

Mr.  S(  iiwAH.  rrol)ably;  yes,  sir. 

The  Chairman  (readint;^: 

T.  •        n  l-nnwn  !he  lendemv  latelv  so  ronspicuou-.,  to  establish  a  commu- 

eump;'nies.  r    u     /-^ 

Was  that  the  motive  that  led  to  the  incorporation  of  the  Carnegie 

^^  Mr  S'riiv  XB.  It  was  not  my  under^tanchn^  of  the  motive.  May 
I  lie  permitted  to  tell  you  something  relative  to  this  tube  company 
ut  ihi.-.  point  that  might  be  of  interest.-* 


The  Ch\irm\n.  To  return  to  this  matter— 

„uHn.  the  18  months  thi.  corporation  has  run  there  has  nc^xr  been  a  ^time 

len  it  1 
petition 


I 


Mr.' Scilw.ul  We  sold  the  Standard  Oil  Co.  a  great  many  plates; 
yes,  sir;  that  is  true. 

Th;'  Chairman  (reading): 

ThU  is  more  than  equal  lo  anv  lonnace  which  the  Cr.rncszie  Co   has  ever 


i'ljKii.vnoN  OF  United  States  Steel  Corpor^vtion      99 

I>  that  true? 

Mr.  Sdiw  \ii.  Well,  I  was  not  aware  of  it. 

The  CiixiRM.w  (reading): 

And  Xalional  Companies,  and  under  the  full  belief  warranted  by  the  facts 
statements,  and  urcumstances.  that  such  an  arrauKemeat  uouid  fully  satisfy 
the  Carnegie  Co.  in  their  ani|)le  demand  for  their  full  measure  of  stccf  tonnage 
for  eonversion  into  tubular  pnxluets.  In  all  of  the  arranf,'emcnts  between 
the  National  .Steel,  Kei.ublie.  .Anieriean  .Sheet  Steel  &  I'l.ile,  and  others  of  the 
industrial  steel  groups,  it  has  been  the  unwritten  law  that  eaih  group  should 
nniline  iLsell  to  the  fabrication  of  its  own  specialties  and  should  voluntarily 
refrain  from  using  constant  suqilus  of  material  bv  the  production  of  the  spt-,  ial 
product  of  its  neighbors.  If  this  unwritten  law  is  to  be  ruthlessly  disregarded 
by  the  (  arnegie  Co.,  it  will,  of  ccurse,  have  a  broader  significance  than  the 
mere  competiiion  with  our  own  products. 

Difl  yon  know  that? 

.Mr.  S(  iiw.\B.  1  never  heard  of  it. 

'Ihe  Cii.\iR.\i.\N.  Did  not  Mr.  Converse,  or  any  member  of  his 
company  ever  tell  you,  or  tell  the  Carnegie  Steel  Co.  that  the 
construction  of  these  tube  works,  as  Mr.  Gates  has  testilied  to, 
would  be  considered  as  a  declaration  of  war? 

Mr.  SciiwAH.  He  certainly  never  told  me. 

I  he  Cn  \iK,M  \\.  Did  you  know  or  did  anybody  inform  you  that  if 
tho-c  works  were  constructed  jientlemcn's  afireenients  were  goinj;  to 
sma.di.  and,  to  use  a  crude  e\i)ression,  "Devil  take  the  hindmost"? 

Mr.  SciiwAi;.  1  never  heard  of  it. 

The  Cii.MR.MAN  (reading): 

It  is  the  intention  of  your  officers  to  continue  their  cfTorts  to  strengthen  our 
po.-ition  at  all  importanl  [)lants,  increase  our  raw-material  supplv,  to  reduce  the 
l!\-ed  charges  thereat,  aiiri  to  combine  to  manage  the  affairs  of  this  comnanv 
'•'nHTv.ilively  and  economically. 

Did  you  ever  hear  of  that? 

Mr.  ScjiwAB.  I  know  that  Mr.  Converse  would  naturally  do  that. 

Exhibit  4 

TESTIMOXY   of   AXDRi: W   CARNEGIE  ' 

Mr.  Sterling.  I  want  to  ask  vou  one  or  two  other  questions 

In  your  opinion,  could  the  United  States  Steel  Co.  have  been  or- 

Ranized  wuh  any  reasonable  prospect  or  hope  of  beinj,'  a  very  im- 

(•,,m'frT,';"'^'\''''^''i''!?'-'''''*^'"'^'"'''''''  ""  Investigation  of  United  States  Steel 
C>nwatiun,  02nd  Cong.,  .nd  Scss.,  1911-1912,  pp.  2377-8-%  2438-3Q,  2443-46, 


m 


lOO 


iNnrSTRlAI.   ("nMlUNATIONS    AND     TlU'STS 


portant  factor  in  the  niaiiuiai lure  of  slccl  and  iron  in  this  country 
until  they  had  ljuu;;ht  the  Carnegie  Steel  Co.? 

Mr.  CAKNi.(;ir..  judge,  1  do  not  want  to  flatter  our  old  concern.  1 
leave  other  peo[)le""to  judge  about  the  Carnegie  Steel  Co. 

Mr.  Sterling.  I  would  like  to  have  your  opinion  about  it. 

Mr.  Carnegie.  That  would  be  an  interested  opinion.  I  would  be 
an  interc;-ted  witness  on  that.  Excuse  nie  from  Ixing  compelled  to 
praise  our  own  organization. 

Mr.  Sirui.iNG.  I  will  ask  you  this  question,  then: 

Did  you  take  into  consideration,  when  you  fixed  a  price  on  the 
Carnegie  Steel  property,  the  fact  that  this  new  organization,  which 
evidently  was  seeking  to  take  in  all  ihe  iron  and  steel  properties  they 
could— did  you  take  into  consideration  the  fact,  in  tlxing  the  price, 
that  they  cmld  not  get  along  without  your  property? 

Mr.  Cakm.gu..  Judge,  1  am  delightL  '.  that  you  asked  mc  that 
f|Uestion.  Listen.  We  considered  §250,000,000  a  fair  i)rice,  and 
Messrs.  Moore  considered  it  a  fair  price,  or  they  would  not  have 
paid  82,000,000  for  the  option,  would  they?  I  will  ask  you  a 
question. 

Mr.  Sterling.  I  wouhi  not  think  so. 

Mr.  CxRNEGiE..  Thank  you. 

Afti  ,•  a  time  we  were  advi>ed  of  the  necessity  for  a  broader  char- 
ter than  the  limited  manufacturing  company  gives  in  I'ennsylvani.i. 
and  we>ai(l,  '•  \V<' shall  capitalize  it.  Two  hundred  and  fifty  million 
dollars  for  the  Carnegie  Steil  Co.  would  have  given  them  a  bar- 
gain. We  will  capitalize  it  at  the  v^ 2 50.000,000,  antl  we  will  take  tho 
I'rick   Coke   Co.   all   in,   at   870,000,000,   making  S;,20,ooo,ooo.  " 

That  i-  how  we  got  the  8,^20,000,000. 

Judging  anything  by  to-day.  Judge,  eouMdering  what  we  put  in 
for  8,20,000,000,  if  any  man  bought  it  for  three  times  that  amount 
ht   would  be  safe. 

Mr.  STi;kLlNG.  Vou  did  get  more  than  that  for  it  win  n  you  sold 
it  to  the  United  States  Steel  Corporation? 

Mr.  Carnegie.  Yes.    Why?    Mr.  Schwab  has  stated  that  dearly. 

Mr.  Sterling.  Yes. 

Mr.  Carnegie.  .\nd  he  has  more  to  do  with  these  things  than  any 
of  us.    He  was  in  charge,  and  he  is  able  and  bright. 

Mr.  Schwab  came  to  me  one  day  and  said  to  me: 

Mr.  Carnegie,  Mr.  MnrRun  spiikc  to  mc  this  tnorniriR,  antl  as  you  and  he  havr 
alwavs  hiTn  Kixv.l  irinxls  an<l  Morcan  «:  ('■«-  have  alvvav  ■;  l)i;en  your  anfiit-  >'i 
baiikini;,  he  said  he  did  not  like  to  approaih  you  on  the  .~u!)jeii,  but  he  wou!  i 
like  to  know  whether  you  are  willing  to  retin-  from  hubiness. 


I 


4 


4 


I 


ImiKMATION    of   UXITKI)    S TATF.S    SteKI.    CoRPOR.\TION'     IOI 

I   said: 

\VelI,  Schwab,  that  depends  upon  my  partners.  Vou  know  mv  scheme  of 
lift—that  I  have  resolved  that  my  old  af:e  is  to  be  spent  nut  in  accumulating 
l.ut  in  distributing  surplus  weall'..  and  I  am  ready  to  j,'o  any  time;  but  it  shall 
he  as  my  partners  say. 

He  said  the  [larlncrs  were  ail  \villin<;.  .\nd  he  came  back  a  few 
(lays  afterwards  and  said  that  Mr.  Morgan  would  like  to  know  what 
terms  1  would  take  for  my  steel  interests.  And  Mr.  Schwab  said 
lu  me; 

I  think  the  option  we  L'ave — S.'5o.ooo,ocx)and  of  (  ourse  the  Frick  .?70, 000,000, 
niakint;  Sjjo.000,000 — was  a  fair  option,  I  think  they  would  have  made  a 
Kreat  deal  of  money  if  they  had  taken  it.     It  ua.-^  cheai),' 

Mr.  SiKRMNc  What  did  you  mean  by  sayin.c;,  "Of  course  the 
Frick  $70,000,000"?  Do  you  nie:in  the  II.  C.  I'rick  Coke  Co.?  1 
want  that  for  the  sake  of  the  record.  I  understood  what  you  meant, 
hut  for  the  sake  of  the  record,  is  that  it? 

Mr,  C,\rni:gie.  Yes.    That  made  S,^:?o,ooo.ooo. 

.\nd  Mr.  Schwab  said,  and  he  has  testified  since,  that  between  the 
time  that  wo  pave  the  last  option  and  this  time  he  tigured  u\)  ap- 
pro.vimately  that  we  had  f^ained  Sioo,ooo,ooo;  that  our  pr*iperties 
and  everything  else  were  worth  that;  and  tlierefore  hv  thought  it 
would  be  a  fair  o{)tion  to  give  Morgan  adding  that  to-day;  and  I 
aureed  with  him. 

Mr.  Stfki.im,.   Th.it  would  ]n-  84:0,000.000? 

Mr.  Carnfgii,.  Vcs;  exactly. 

Mr.  Stkruno.   But  you  sold   it   for  more  than  84:0,000,000? 

Mr.  Carnegik.  I  did  not,  sir. 

Mr.  Sri  Ri.iNG.  You  did  not? 

•Mr.  Carnfgh;.  No,  sir.  I  >old  it  and  got  two  huiulreel  and 
twenty  millions  of  bonds.    I  did  not  get  any  common  stock. 

The  world  is  altogether  mi>taken  about  that.  .Ml  th;it  I  asked 
.Morgan  was  $4:0.000,000;  and  it  was  taken  at  that;  and  1  owned 
just  about  half,  and  I  got  821,^000,000. 

.Ml  this  talk  about  my  holding  for  a  high  price  and  everythi.ig 
of  that  sort,  gentlemen,  has  no  more  foundation  than  that  you  held 
for  it  I  considered  wiiat  was  fair;  and  that  is  the  option  th;it  .Mor- 
trin  got.    Schwab  went  down      d  arranged  it.    I  never  saw  Morgan 

.  the  subject  nor  any  man  connected  with  him.  Never  a  word 
I'l-'^ed  In-tween  him  and  me.  I  gave  my  memorandum  and  Mor|,Mn 
saw  it  was  eminently  fair.    1  have  been  told  many  times  since  by 


^9 


102 


Indvstrial  Combinations  and  Trusts 


insiders  that  I  should     ive  asked  S  100,000,000  more  and  I  could 
have  Kotten  it  easily.  .  at     /•-  . 

Once  for  all  I  want  to  put  a  stop  to  all  this  talk  about  -Mr.  Lar- 
nef^ie  forcinfi  hi,i;h  prices  for  anything. 

There  is  the  truth,  gentlemen.  .       ,r     /-  •         a 

Mr  Sii  ki,iN(..  It  has  been  said  in  this  hcanng,  Mr.  Carnegie,  and 
if  it  is  true  you  can  corroborate  it,  and  if  it  is  not,  you  ought  to  have 
the  rJ.'ht  to  refute  it,  that  the  Carnegie  Steel  Co.  got  a  great  deal 
more  than  its  property  was  worth,  for  the  reason  thai  that  comiwny 
knew  or  con>idered  that  its  property  was  absolutely  neces^ary  to  the 
United  States  Steel  Corporation  in  order  to  make  it  a  -uccesslul 
monoiioly  of  the  steel  and  iron  business. 

Mr  CvRNT.oir..  Gentlemen,  we  had  made  up  our  plan:  n.nd 
boii'dit.  I  think,  5,000  acTe>  of  land  at  Conneaut.  and  we  we^c  go- 
in  lo  put  up  work>  there  thai  would  have  revolutionized  '  mgs, 
ami  that  lu.tl  no  reference  to  Mr.  Morgan,  and  with  no  m.,..  idea 
that  Mr  Morgan  would  have  an  oi)ti.m  than  that  you  would.  Vu- 
went  on  totally  reuardle.,s  of  anything  of  that  kiml.  Our  plan^ 
were  being  made,  and  if  we  had  not  sold  out  we  would  have  been  a 
considerable  concern  by  thi>  lime.    That  is  (luite  true. 


Mr.  r.ARDSr.R.  I  understood  you  to  say,  Mr.  Carnegie,  th.it  you 
and  Mr.  Schwab  decided  together  that  S4-'o,ooo,ooo  was  a  fair  val- 
uation for  the  Carnegie  Steel  Co.? 

Mr.  Carnkcii..  'Ses.  Mr.  Schwab  had  -omc  statements.  1  can 
not  give  them  to  you  now.  but  Mr.  S(  hwab  can  give  you  the  whole 
matter.     He  attended  to  those  things. 

1  never  s.iw  Morgan;  I  never  saw  any  of  his  agents:  never  spoke 
to  any  other  man  a)>out  it  except  Schwab,  and  then  just  one  or  two 
sentences.  Morgan  would  like  to  gel  my  price.  Schw.dt  sat  down 
and  we  talked  it  over,  and  1  said: 

Vc>,.  I  am  (|uitc  willinB  to  sell  at  (our  hundred  and  twenty  millions. 

.\nd  Mr.  Sduv.d)  has  stated  here  that  it  was  appro.ximately  as  he 
estimated  the  advance  we  had  made  between  the  two  ui)tions. 

Mr.  CiARnM.R.  I  wanted  to  know  whether  $420,000,000  was  the 
sum  you  set  as  the  value  of  the  Carnegie  Co. 
Mr.  CARNi(.ir..  To  Mr.  Morgan. 

Mr.  C.ARUNKR.  Did  you  mean  ?42o,ooo,ooo  in  cash  or  $420,000,- 
000  of  the  securities  of  the  new  company? 


3 

I 


1 


1 


J 


I'oRMATioN  OF  Umti:d  Statks  Stkkl  Corporation-    103 


« 


1 


Mr.  Carnfxie.  I  was  (luito  willin,:^  lu  lake  thr  ^  [nr  cent  honds  of 
the  company.  Vou  know  they  arc  <iuuti'd  at  115,  and  I  toe!,  them 
at  par.    1  do  not  rc<j;rct  doin^  so. 

Air.  Gakdnf.r.  Arc  you  aware  thai  the  V  -ited  States  Steel  Cor- 
poration issued  against  the  Carnegie  Co.  $402,000,000  worth  of  se- 
curities? 


Mr.  (\\RNT,Gn:.  I  am  not,  sir. 
Mr    (i AKDNFR.  It  is  a  fact. 
-Mr.  C.XRNEGIE.  I  have  never 
Mr.  Gakdnfr.  To  he  accurate. 


I  never  lieard  oi  it. 

:i('ard  of  it. 

S4()2,oof).i()o  was  the  amount  of 


securities  of  the  United  States  Steel  Corporation  which  were  put 
out  to  purchase  the  Carnegie  Co. 

Mr.  CARNi:(;iF.  .Mr.  Canlner,  that  is  another  sur[)rise  this  morn- 
ing. I  do  not  know  what  they  did  with  it.  ("hi-  I  assure  you:  1 
did  not  get  more  than  two  hundred  and  thirteen  millions  of  bonds— 
not  one  cent  more;  nor  was  I  a  party  to  anv  arrangement 

Mr.   Gardner.    "\"ou    took   your   |)avment   entirely   in    lionds? 

Mr.  Carnegie.  I  did. 


Mr.  (Iardner.  I  want  to  ask  a  |iractical  question  to  clear  my 
mind.  Mr.  Gates,  in  his  evidence,  stated  Mr.  Carnegie  was  going 
to  build  some  tul)e  works  at  Aslitainila.  lie  meant  ConneauT.  did 
he  not? 

Mr.  Carnegie,  ^\s,  sir. 

.Mr.  Gardnik.  He  -poke  about  your  purpose  to  build  a  r.iilroad. 
Was  there  any  such  i)roposition,  or'was  that  a  mistake  of  Mr.Gates? 

.Mr.  Carnf(.ie.   Therein  Mr.  Gates  was  quite  correct. 

.Mr.  Gardner.  Was  it  a  railroad  to  be  built  from  Pittsburgh  to 
the  sea? 

Mr.  Carnegie.  Yes;  I  told  vou  vesierd.u  that  Mr.  X'air'crbilt 
sent  for  me 

Mr.  Gardner  (interposing).     I  mean  in  iqoo? 

Mr.  Carnegie.  Yes.  We  had  a  survey.  \\\'  were  intending  to 
build  a  railroad  to  the  sea. 

Mr.  Gardner:  From  Pittsburgh  to  the  sea? 

Mr.  Carnegie.   Yes. 

Mr.  Gardner.  Mr  Gates  said,  ".Vnd  a  railroad  from  A.-htabula 
'o  his  works  in  the  Pittsburgh  district." 

Mr.  Carnei.u  .  Yes.  Prom  Conneuut. 

Mr.  Gardner.  lie  said  Ashtabula. 


■si -I 


104 


Industrial  Combinations  and  Trusts 


Mr.  Carnecik.  It  doesn't  matter. 

Mr.  Gardner.  And  that  railroad  was  already  built,  was  it  not? 

Mr.  Carnegie.  \  es. 

Mr.  Gardner.  I  just  wanted  to  <;et  the  facts  in  my  mind. 

Mr.  Carnegii:.  Yes,  sir. 

Mr.  Gardner.  And  this  railmad  you  thought  of  l)uildin,q  was  an- 
other proposition  entirely,  was  it? 

Mr.  Carni;c;ie.  Yes,  sir;  and  let  me  tell  you,  Mr.  Gardner,  it  was 
this  threatening  extension  of  railways,  and  especially  to  continue  the 
Conneaut  road  to  the  coke  ovens  of  the  Pittsburgh  district,  that  in- 
duced the  president  and  the  vice  president  of  the  Pennsylvania 
Road  to  ask  an  interview  with  me.    I  detailed  that  to  you  yesterday. 

.Mr.  (}ardner.  That  was  a  little  earlier.  I  wanted  to  get  at  the 
truth  I  If  otherwise 

Mr.  Carnegie  (interrupting).  That  truth  is  quite  true. 

Mr.  (Gardner,  .\bout  the  statement  that  about  the  time  when  the 
United  States  Steel  Corporation  was  fornu-!  ■'  was  your  intention 
to  build  tube  works  at  Conneaut  and  .i  railr  .-om  Pittsburgh  to 

th»^  sea. 

Mr.  Carnegi!,.  \'es,  sir;  and  wc  bought  ground  for  the  purpose,  as 
I  told  you. 

Mr.  CiARDNER.  I  Understand. 

Mr.  Carnegie.  And  also  the  plans  Mr.  Schwab  was  working  on, 
and  he  informed  me  that  he  would  break  ground  in  April,  and  that 
in  a  year  he  would  have  those  works  running. 

Mr.  (VvRDNER.  Tlie  conteniixirary  evidence  is  much  clearer  on 
that  than  it  is  on  thi'  railroad  proposilii)n.  Did  vou  not  take  any 
further   steps   thar.    having   the  surveys   made   fnr   the   railroad' 

Mr.  Carnegie.  No;  the  Pennsylvania  road  sent  for  me,  a.>  1  told 
you 

Mr.  Reed,  Sr.' (interposing).  May  I  explain  that?  What  Mr. 
Carnegie  is  talking  about  happened  in  iScjO,  when  the  Be^.ienier 
road  was  built.  What  you  arc  talking  al)out,  Mr.  Gardner,  was  in 
iQoo,  or  along  about  there.  We  had  a  survey  C(*rps  out  running  a 
line  from  Pitt-burgh  to  connect  with  the  Western  Maryland  Rail- 
road. Our  idea  was  to  get  to  Haltimore  with  a  short  line.  We  had 
not  done  anything  except  start  the  surveying  corfis.  \\\'  did  not 
form  any  corporation  or  anything  of  that  sort. 

Mr.  Gardner.  It  was  a  matter  seriously  discussed? 

Mr.  Reed,  Sr.  Yes,  sir. 


r 


i 


rnk.MAiiox  OF  United  States  Steel  Cokporatiux 


xo; 


Mr.   Hkai.l.  Now,  about  this  railroad 

Mr.  Carnegie.  Which  ore? 

ih^!'i}^^^''\r^''^  ""'  ^^'-'^  '"'  ^''•■^' ''■''  ^^^«"t  ^bout  the  time 
L  \  V  nir  T'^i^'l'?  T.''  "^«^^"i^^'^i  ^hat  one  that  was  to  tap 
he  U  extern  Maryland  I  believe,  and  reach  to  Baltimore.  1  have  a 
iltle  cuno.s.ty  to  kriow  just  what  was  contemplated  in  the  constr^c^ 
.on  of  that  railroad;  what  kind  of  a  road  it  was  to  be;  what  was  its 
purpose:  what  was  the  ultimate  end  and  object  in  view> 

Mr.  I  akm:(,ik.  I  he  ultimate  end  was  to -ive  PittsburRh  comneti- 
t.on  of  railroads     She  was  under  a  vast.  str<,n«  nmnopolj.     ^ 
Mr.  Hkali..   That  is,  of  the  PennsvKania  Railroad? 
Mr.  (  arnegie.  1  told  vou  this  morning 
■Mr.  Hk.\i.l.  Ves.  '  "" 

Mr.  f^"  \RNi:*'.i!:.  J  told  you  that  this  morninrj;  how  I  had  seen  flour 

-lHpp,d  through  the  streets  of  I'i,tsburj,h  ..  New  York  from  Chi- 

"'x.r  E':7.    v"  '''r,">''''  ^!"'^  ''  ^^""^  Pittsburph  to  New  York. 

waUT?  "'■  '  '^'^  ''■'''  ^"  '■'-'^^h  *^^'^P  ^^'1'^"^'  tide- 

Mr.  Carnegie.  Certainly. 

Mr.  Beall.  At  Bailimore? 

thf^Uwl^M'"''  i^'".'  ^';^.^f  ""action  with  one  of  the  railroads- 
ni(   Western  Marvland,  I  think. 

1,  n',"'  .^f'^^'r  ;\?'  "I'-o^'Kh  t'^"  Chesapeake  Bay  out  to  the  ocean? 

Conl''i  J^f"-"'  '^^'^'^  ^vnuldhave  been  the  mileage  of  that  road?- 
Louid  NouRiveusan  appro.ximation  of  it^ 

A  r  (.ARNEGIE.  It  w,  uld  have  t,,  be  a  puess.  Judse  Keed  what 
would  you  say  the  distance  was?  "^     ^  ' 

Mr.  Kr.i;D,  Sr.  May  I  answer,  Mr.  Chairman? 

I  he  Chairman.  Certainly. 

the  L-ni!'n  R;Mr\!^V'^^       ^^''■' ^'''  '"  ''"'"''  ^''^"^'^  '5"  miles  from 

Fri^overthJ'i'n'*  ^''  ^''"  ''"'."  '"■:'''^>'  •'>■  "^''  ''i^'^l^-^rKh  &  Lake 
munths.  "■'  '"'■^■^•>-^'^'  ^"'l  "'■"  1'^'  ^'Pencd  in  a  couple  of 

Nc^w'vork'  Ccm-^'r/^'''''"  "^  ''''"^"  '^^''^  '^"'  °°^  ^^''""S  ^'^"^^'^- 


J 


io5 


IXDUSTRIAL    C'o^rr.TXATIOXS    ANT)   TRUSTS 


Mr.  Rr.r.D.  Sr.  Xo,  '^ir;  it  is  being  built  by  the  Wtstirn  Maryland 
and  the  Pitt-huruh  &  Lake  Erie,  as  I  uf.dcrstand  it.  The  i'itts- 
burjjh  &  Lake  I->ie  i>  a  New  Vork  C\'nlrai  road. 

I  ('o  not  kr.ow  who  <)\vn>  the  Western  ^Lirylar^d  roatl  exactly. 
It  is  owned  art)und  Baltimore,  1  think. 

Mr.  Bi:  \i.i-.  That  has  pru^-^n  to  i)e  a  very  jirofitable  railroad? 

Mr.  Rr.i.i),  Sr.  It  has  not  been  opened  up  as  yet.  It  is  to  be 
opened  up  in  about  two  months.  It  would  have  been  a  prol'itable 
road  if  we  had  built  it.  ll  is  the  shortest  line  to  Baltimore  from 
ritt. -burgh. 


The  Chairman'.  Until  a  few  years  or  a  very  short  period  before 
the  formation  of  the  United  States  Steel  Corporation  there  were,  I 
believe,  three  large  steel  companies  engaged  in  the  manufacture  of 
semit"inished  jiroducts — the  >sational  Steel  Co.,  the  Federal  Steel 
Co.,  and  the  Carnegie  Steel  Co.  All  three  of  these  companies,  I 
believe,  were  holding  companies,  I  believe.    Is  that  correct. 

Mr.  Carnkgii:.  Tiiey  were  holding  companies. 

Mr.  Ri;i;d.  Is  that  a  cjuestion  of  Mr.  Carnegie  as  to  whether  there 
were  any  other  manufacturers  of  scmifmished  products? 

The  Chairman.  \o. 

Mr.  CARNii.ir.  Those   thrc2  were? 

The  Chaikm  \N.  There  were  these  three  large  holding  companies, 
engaged   in   t!ie   manufacture  of  semifinished   products? 

Mr.  CAKNi.(,n:.  What  do  vou  call  seminni^hed  products? 

xMr.  Ri  ID,  Sr.  Hilkts. 

Mr.  Carniu.ii  .  We  did  not  sell  billets. 

The  Chairman.  By  that  I  mean  the  produ'-ts  of  steel  which  were 
>old.  which  wrre  marketable  commodities  in  your  h.mds,  but  which 
were  raw  materials  U>  the  concern  which  took  them  in  that  ^hape 
and  manufactured  them  to  a  still  higher  degree. 

Mr.  CARNi;i,ir..  We  sold  billets.  Judge  Reed  says;  and  skelp,  and 
so  on,     I  do  not  know  to  what  extent. 

The  Chairman.  I  will  explain  my  meaning  more  fully,  Mr. 
Carnegie. 

l"or  instance,  in  the  Carnegie  Co.  you  had  your  blast  furnaces? 

.Mr.    CARNlr.IF.    ^'e>. 

The  Chairman.  \'ou  sold  pig  iron,  did  you  not? 

Mr.  C\kNi  (,ii;.  No.    We  used  our  i)ig  iron. 

Tin   Chairman.  Vou  did  not  sell  pig  iron  at  all? 


'% 


F< 


)R.M.\T10X 


('V  Usin:i)  States  Steel  Corporation 


lo; 


Mr.  Carnkgif..  X,.;  I  do  not  think  we  ever  did 
iK.  Chairman-.  The  pig  iron  or  the  hot  metal,  u^uulIy  spoken  of 
a>  pi-  iron,  you  conveyed  in  kidles  to  your  furnaces--- 
Air.   Carnegii:.   Ves. 

The  Chairman.  And  from  that  iron  you  made  steel? 

•Mr.  C  ARNl  r,ir,.  ^  es. 

The  Chairman.  Did  you  sell  steel  billets^ 

Mr.  C,\RNEGiE.  Yes;  I  think  we  sold  steel  billets. 
l.e  (  iiAiRMAN.  Those  !  illets  were  purchased  by  tube  companies 
^.   b    companies  making  rails  or  by  companies  ma'king  any  unnZr 
"1    h.ngs  and  made  into  (ini.hed  product^,  were  th.ev  n,V^    ^ 

.as  it  noe '"''•         '  ^  ''""'^  '''"'  "'"  ''''^'''  '"  ^'^  -^'>-  '!^'y^- 

United  ^sJn?'''^^-  V"/-''  '"  ^'"".y'^''  ^'^^^'^  the  fornuition  of  tlie 
Lnited  states  Steel   Corporation. 

V'lu  did  not  sell  steel  ingots,  for  instance^ 
wr.    Carnegie.    Xo. 

!he  Chairman.  Vuu  manufactured  them  immediate! v^ 
■Mr.   (.\rnegie.    \es 

:uv!r ';^:;i;;;;r,;i  "i'jrvtj^ir  "''"*"'""' '-''^'"•■'^ '''- ' 

llH-Un,K.„,N.  lli,|j-„u„„,^,,||,„|||j„  J 

tompanifs  as  tile  SluH.y  Steel  Tulie  Co  > 

Mr.  ClKNI;,;,i:.  We  s„l,l  lelle.-:  I,„t  tttillintts  „l  tm,.?     X,,-  tl.ttt 
-  tar   ,ey,„„l  an.vllt.n.,  that  1  kn.nv  „f.     I  ,1„  ,„„  ,„„,,„|  ,„  fc™ 

Jl't'^e^rrriT-SJt'"' "'"  '■'"■  '""■ '"  ^"■»»" '°  •"-  '"- 

Uletterieat^St'e it 'i'u""' ;.''''  """^r"'  ">"*  »"'-">ar,i<  l„r,„ed 

think 'th '"''''■■'' M  ^  ^''7  ""  ''""'"  ^^''-y  '"'"-'^f  l"'"''^-  I  >h«ml,i 
iiR>  nad  the  (  hicago  mills  so  near 

Wire  Co",?  v'';-'''^?.r''."''^""«  "•'"^'  '"^^'  t''^'  American  Ste.I  & 
'     the  s'h?^  n  St  "rT  /"r  ^"■'  .^'^'V^'-'"^^^'"  ^heet  .V  Tin  Tlatc 

others  nail     i  1  ,t"v,  "'  '"''  "^^^•''  ''^^'  ^"'"^■^•"^■^-  ''""'i^'ds  of 

tntrs,  nail  mills,  and  the  like,  us  a  rule,  bought  their  raw  materials 


io8 


Industrial  Combinations  and  Trusts 


from  these  lar-e  companies  making  the  semihnished  products,  and 
then  carried  them  still  furtbLT  in  the  state  of  manulatlure  toward 
the  hi}j;hly  finished  product;  is  not  that  true? 

Mr.  Carnixuk.  Quite  so.  ,        c-      ,  *  wi- 

The  Chairman.  Vou  remember  when  the  American  bteel  &  Wire 
Co.  was  formed,  do  you  not? 

Mr.   Ri:f.d,   Sr.   Give  the  year. 

Mr.  Rkku.  iSqc;,  was  it  not? 

The  Chairman.    1889,  I  believe. 

Do  you  remember  when  the  National  Tube  Co.  was  formed 
and  when  the  .\merican  Sheet  &  Tin  Plate  Co.  was  formed,  Mr. 
Carnegie? 

Mr.  Carnegie.  No.  t  u  i- 

The  Chairman.  They  were  all  formed  between  1897,  I  believe, 
and  1900.     Is  that  right? 

Mr.  Reed,  Sr.   Yes. 

The  Chair-v  vN.  1  do  not  carry  any  figures  in  my  mind. 

T  see  that  Mr.  Herbert  Knox  Smith,  in  his  report  on  .he  steel  in- 
dustry, makes  this  statement,  after  a  resume  and  report  of  these 
various  finishing  concerns  and  their  formation  into  laige  holding 
companies: 

Immediately,  however,  came  the  next  step — 

That  is,  after  the  formation  of  the  American  Sheet  &  Tin  Plate 
Co.  and  the  American  Steel  &  Wire  Co.,  and  the  others— 

Immediatelv,  however,  came  the  next  step.  These  Rreat  concerns  almost 
simultaneously  began  the  final  linkin,!.,'  up  of  the  chain  of  production.  Oiue 
begun  by  one  i  oncern,  others  followed  in  sell-defense.  1  he  ■'se((jndary  com- 
panies began  to  reach  back,  aciiuiring  ore  reserves  and  crude  steel  plants. 
For  example,  in  iqoo,  the  Steel  &  Wire  Co.,  whose  supi>ly  of  materials  had  pre- 
viously been  punhased  maiiilv  from  the  Carnegie  or  the  lederal  to.,  plannul 
U)  make  its  own  steel;  likewise  the  National  Tube  fo.  The  "primary  con- 
cerns, finding  these,  their  chief  customers,  turning^  into  rivals,  retaliateu  bv 
reaihing  forward  to  the  manufacture  of  lini.-.hcd  product-. 

Paramount  in  importance  was  the  ore.  'l"he  reiognition  of  that  imtiort^nce 
lame  strangely  late,  but,  once  recogni/.ed,  it  became  an  axiom  that  no  large 
coniern  could  stay  in  the  business  urless  fortilied  by  its  own  ore  reserves.  Hy 
i.joo  the  bulk  of  the  Lake  ere  was  in  the  hands  of  less  than  a  dozen  com[)anies, 
with  a  similar  concentration  in  coking  coal.  ^^ 

Sue  h  elTorts  on  the  part  of  these  great  concerns,  in  striving  eacli  t       integrate, 
a,  make  itself  wholly  independent,  threatened  to  rc<nU  in  a  creat  and  sud.len 
increase  and  duplication  of  the  steel  producing  and  tinishiug^  capacity  of  the 
country,  and  to  involve  them  also  in  an  invasion  of  each  other  s  business. 


4 
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4 


I 


FORAIATION   OF    UmTED    StATES    StEEL   CORPORATION     109 

1)0  you  remember  when  that  transition  sta^e  was  occurring? 
Mr.  Carntgii:.  I  think  that  is  remarkably  well  described      I 
think  that  gives  you  the  situation, 
ihr  Chairman.  I  think  so. 
A^ain,  (luoting  from  page  iS  of  Mr.  Smith's  report: 

tim^^'ii^f-rvf'  :'"^'''^'"'.>'  '"^^■^'■''"1  '"  the  industry  what  the  trade  press  at  the 
fmc  called    'the  .mpendmR  Mru««le  of  the  Riants,"  a  contest  l.etwcrn  creat 
concerns  ul,o,  under  su,  h  ( ircunislances,  might  be  forced  to  work  out  in  ric 
orous  competition  the  survival  of  the  fittest.  ^ 

-^u'';  ;vere  the  conditions  in  the  steel  industry  in    iqoo.     The  spark   that 
l.-'lited  the  tram  was  the  threat  of  the  Carnegie  Co.  ,0  erect  a  great  tuhc-phn 
near  Cleveland,  thus  inva<iing  the  field  of  finished  manufacture. 

r  read  that  word  "  threat"  because  it  is  so  written  here  I  do  not 
mean  to  imply  that. 

Mr.  Carnkgif.  I  quite  understand,  Mr.  Chairman. 

Ihe  Chair.\un.  I  do  not  mean  to  imply  that  you  made  any 
hreat.  I  wou.d  rather  be  inclined  to  believe  that  your  determina- 
tinn  to  build  this  great  tube  company  would  naturally  cause  some 
concern  to  your  coni[)etitors. 

-Mr.  Carniuhe.  The  National  Tube  Co.  was  one  with  which  we 
had  an  agreement.  They  bought  billets  from  us,  and  they  made 
their  tubes.      I  hey  were  at  McKeesport. 

Mr.  Kkkd,  Sr.  Their  main  plant  was  at  McKeesport,  and  they 
liaci  another  at   Riverside,  near  Wheeling.  ^ 

Tulle  Co^^"^'*^"  ^''"^'■'  '""^^  '""^''  '°  ^"'''''  ^'"^"^^  ''^  ^^'^  National 
Mr.  Rf.kd,  .Sr.  They  have  about  eight,  I  believe. 

u  ^,'^^''-''"--  '^I;iy  I  confirm  an  impression  from  the  fudge  be- 
cause he  knows  and  1  do  not?  ■'      '^  ' 
The  Cl.'AiiniAN.   Certainly. 
Mr.  Carn;,,;u;.  .My  impression  is  that  the  Xational  Tube  Co 

5ir  .wc'?'"'"''""''       ''""^  "^""  ^''''  "'^''"-'^'  ^'"^  '^  ""'•  ^y 

.Mn'M<K,rr'  ^''  ^^"^  ^'*"'"'''  '  ''''  ^''-  ^^'  ""^^""«  '"  '^''  ^^"^ 
Tiihen''tT;i"'  ^."l^  -f"  "   ''  ""^'^'■'-    ^^'^'^^  had  the  National 

i  ur)(    \^o_    t„  (jy  with   It.'^ 

Mr.  Reed,  Sr.  Will  the  committee  permit  me  to  state? 

as  to  the'dS:  ' ''""'"  '"""  '""  ^'"^~  ^•^^'  "^=='^'  ^^'^  ^'^-^^-i' 
Mr.  Ri.,,,;.  ih,,  x.uional  Tube  Co.  was  independent.    It  wa.-,  not 


no 


Inui  STKiAi.  Combinations  and  Trusts 


afTiliated  with  anv  concern.  'I'hc  Naiional  Stcvl  ('<>.  was  Ju(l<ro 
Moore's  concern,  'lliat  sui)i)lie(i  the  raw  material  lor  the  sheet  and 
tin  i>iale  ami  Miel  hoof  business. 

Mr.  Gardm.k.  The  National  'i'ube  Co.  was  regarded  as  one  of  the 
M^iri'in  proup,  was  it  not.'' 

Mr.  Ri.i.i).  Ve^. 

Mr.  Cakuni:k.  The  National  Steel  Co.  was  regarded  as  one  of  the 
Moore  rrrouj)? 

Mr.  C  XKNir.iK.  Why  was  it  re,c;arded  as  one  of  the  Morgan  pmup 
— the  -National  'i'ulic  Co.':' 

Mr.  Rkf.d,  Sr.  It  has  been  reorpianized  and  hnanced  t]irouf.;h 
Mr.  Morgan's  office. 

Mr.  CvRNKGir..  Now  we  are  qettint;  at  it.  1  remember.  I  \\;;s 
afraid  to  :-tate  it  until  it  was  conlirmed.    The  National  Steel  Tube 

Co. 

The  CiiAiRMVN.  I  do  nt'{  want  to  intiTrupt  you,  Mr.  C  arncs'.e. 
bi't  I  think  vou  can  aii-wer  two  questions  at  once,  because  I  shall 
relre-h  your'meniory  still  further,  so  that  you  can  tell  me  about  the 
whole  transaction. 

Mr.  Carm'.c.h..  I  shall  be  deli.tjhted,  Mr.  Chairman. 

The  CnAiRMw.  I  a>ke(l  Mr.  Schwat)  about  it. 

Mr.  Carnkgu:.  What  do  you  want  to  a>k  me  about  it  for,  if  y^  n 
asked  Schwab?  [Laughter.]  Let  me  see  what  Schw;'.!)  >aid,  and 
I  will  know  what  w,i>  done.    It  will  refresh  my  memory  at  once. 

The  Cii  \IRM AN.  .Ml  riizht.  lie  did  not  remember  it  until  I  called 
it  to  his  attention,  and  then  he  said  he  did  renv.  mbir  it. 

I  read  now  from  the  minutes  of  the  National  Tul)e  Ci)..  from  Jan- 
uary ii,  i()Oi,  to  date,  containing  all  minutes  of  the  said  com[)any: 

Mr.  Converse  said  that  thiri'  wcrf  rumors  thul  the  Carnifjie  ("o.  is  aliout  lo 
install  and  oiH-ralc  a  tulx'  works,  with  a  lapaiily  ol  ;!50,ooo  tons  |)t'r  annum. 

Mr.  CarnkcUK.  Tha.t  is  from  the  minutes? 

The  Cii.MRMAN.  ^'e-•.  This  is  from  the  nu'nutes  of  the  National 
Tube  Co.,  and  shows  what  they  were  thinking  about  what  )ou  were 
doinp;: 

Mr.  Converse  said  that  there  were  rumors  that  the  CarncRie  Co.  is  about  to 
install  and  operate  a  tube  works,  with  a  capacity  of  j.So.ooo  tons  per  annum. 

During  the  i8  months  this  <  orporation  has  run  there  has  never  been  a  time 
when  thev  could  not  h.i\e  nianulactured  to  advanl.mo  and  [jrol'il  materiid  in 
comixnition  with  nearly  all  of  the  numerous  indu-trial  Rroups.  ineludinR  the 
CarneRic  Co.,  I>ut  the  policy  of  the  manauemenl  -o  far  has  been  that,  cxiept 
forced  by  self-protection,  liiis  company  would  not  displace  a  ton  of  its  nci^h- 


•^ 

( 


(I 


i 


FuRMATiox  OF  United  States  Steel  Corpokati'^v 


I II 


^ 


l.ors  product  by  entering'  any  other  lines  than  strict  tubular  works  It  has 
r.mdly  connned  use  I  to  this  prin,  iple  up  to  this  time.  The  farneK'ie  Co  is  no'v 
.  )ijoy.nK  trade  in  plates  on  ships  at  the  rate  of  about  i^o.ooo  tons  per'annum 
'".'''!"'{  -^^lwn:il  Iriinsil  Lu.,  a  de[)artment  of  the  Standard  Oil  Co 

I  his  IS  more  than  etjual  to  any  tonnage  uiiich  the  CarneL-ie  Co  has  ever 
made  for  tubular  i)urposes.  Irom  this  it  will  be  seen  that  the  CarncL-ie  Co 
•  <:ercsts  have  been  protected  through  the  care  and  friendliness  of  the  Slandard 
0,1  and  national  companies,  and  under  the  lull  belief,  warranted  bv  the  ficts 
Matements,  and  circumstances,  that  such  an  arransement  would  fulK- satisfv  the 
(  arneme  Co.  in  iheir  ample  demand  for  their  full  measure  of  steeftonnaiie  for 
.onversion  into  tubular  products.  In  all  of  the  arrangements  between  the  .Na- 
tional Steel,  Kepublic,  .\mencan  .Sheet  Steel  &  I'lale,  and  others  of  the  indus- 
trial steel  groups  it  has  been  the  unwritten  law  that  each  «roup  should  conline 
iNelf  to  the  fabrication  of  its  own  specialties  and  should  volunlarilv  refrain 
Irom  usinK  constant  surplus  of  material  by  the  production  of  the  .special' product 
nt  its  nei^-hbors.  I  this  unwritten  law  is  to  be  ruthlesslv  disregarded  bv  the 
(  arncgie  Co.,  it  will,  of  course,  ha\e  a  broader  significance  than  the  mere'com- 
ijetition  with  our  own  products. 

.Mr.  Rkkd,  Sr.  What  did  Mr.  Schwab  sav  to  that' 

The  Chairma.n.  I  asked  him,  -Did  vou  know  that?''  and  he  rc- 

phed,  "I  never  heard  of  it.''     Mr.  Schwab  said  he  knew  n^thin- 

about  it. 

I  am  a.skin^  you,  Mr.  Carne,!:,'ie,  if  you  remember  at  that  time 
tli!>  protest  of  the  tube  company  against  your  constructin-^  that 
mill  at   C'onncaut? 

.Mr  Car.vkoik.  I  never  heard  a  word  of  it.  If  Schwal)  tdis  you 
tl\it  hf  was  Ignorant  of  it,  I  can  not  account  for  it:,  being  in  circu- 
lation. 

The  Chairman.  'I'hat  was  on  the  minutes  of  this  tube  company 
Muit  IS  %\hat  they  <iid  think  about  it.     Why  was  it,  <io  you  know, 
that  they  were  protestir.g  so  vigorously  against  your  con-tructin'' 
those  tube  works?    Could  they  not  make  tubes  ju'st  a.^  cheap  a^  \oi"i 
»>iiil(l  with  that  mill? 

-Mr.  Carm.oik.  Vou  must  ask  somebody  else  than  me,  .Mr  Chair- 
man. I  can  not  conceive  of  it.  All  of  this  is  new  to  me.  I  never 
heard  of  it  liefore. 

The  broad  way  that  I  understood  Ihe  thing  was  this:  We  fur- 
nished tubes  for  the  National  Tube  Co.  and  they  linished  them- 
but  they  resolved  to  erect  blast  furnaces.  This  is  the  story  as  I 
remember  it:  They  went  on  to  erect  their  blast  furnaces  Then 
ot  course,  they  were  able  to  make  their  own  material,  billets,  etc' 
I  hat  IS  how  they  left  us. 


'Thus  in  original.— Ed. 


J 


H2  Industrial  Combinations  and  Trusts 

The  Chairman.  Vou  say,  " That  is  h.nv  tliey  Uft  us."    You  mean 
thev  left  you  without  a  custonu  r?  .    ,     •  , 

Mr   CvRNicuK.  Yes.    Thtv  were  not  satistied  with  manuiaclur- 
ing  the  bildts'  into  tubes,    'rhty  ^vanted  to  make  the  whole  thm« 
through. 
The  Chairman.  T  see.  .  i  i      , 

\Ir  C  \KN)  (Ui-  We  had  been  looking  for  a  site  where  we  could  put 
additional  works,  where  we  could  extend;  and  it  dul  ^^'^  ^^^^^^^ 
much  consideration  to  let  us  see  that  U  we.  having  that  C.nn  aut 
Harbor,  put  a  modern  steel  plant  ih.re,  the  ore  would  come  there 
and  be  dumped  from  the  b<.at  right  in  the  furnace  yard  And 
Mr  Schwab  drew  plans.  The  mill  was  i.ioo  feet  long,  and  the  ore 
stood  there,  and  the  coke  was  brought  up  from  our  own  mines  in 
the  cars  which  had  taken  the  ore  down  to  our  mil  s,  -J"*'  ^;'^';' 
wouM  otherwise  have  returned  empty;  and  there  we  stood,  wi  h  Ih. 
raw  material  there.  an<l  the  ^,ni^hed  tubes  would  come  ou  here 
[indicating],  with  all  new,  modern  mach.n.ry,  no  men  hardly,  all 
rolls  conveying  the  masses  without  hand  labor   and  al     h^    • 

Mr.  Schwab  showed  me  that  plan.  ju>l  as  he  did  the  plan  1  . 
the  great  plant  for  the  open-hearth  furnaces  at  V,:'""?;  ?t''a id 
said:    "Schwab,  what  diUerence  can  you  make.''       And  he  said, 
"Mr.  Carnegie,  not  less  than  Sio  a  ton. 

Of  course,  you  must  remember  that  the  tube  work^_  were  ver> 
old,  and  had  been  runnin-  f.-  ,  'ong  wh^le.  and  this  project  of  our 
was  a  total  departure.     So  he  said:  "A  clilierence  oi  ^^o-^J^ 

When  the  National  Tube  Co.  lelt  us  and  began  to  build  furnaces 
for  themselves,  then  we  decided  that  we  would  build  at  Conneaut 
That  was  one  reason.  That  was  not  the  whole  rea>on.  I  had  a 
great  desire  to  get  into  the  manufacture  of  steel  cars  because  I  sa^v 
that  they  were  bound  to  supersede  wooden  cars,  just  a^  1  saxN  that 
iron  bridges  were  bound  to  succeed  wooden  bridges. 

That  was  the  situation.    That  is  all  1  know  ol  our  relations  to  the 

National  Tube  Co.  .  .  ,>    „,  f  ,r  ci^o  -i 

The  Chairman.  You  were  in  a  position  to  make  tuem  lor  bio  a 

ton  less  than  your  competitors?  ,.  i       t     •  i    ,,t 

Mr.  Carne6ie.  Yes.    And  I  have  talke.l  to  Schwab  since  abou 
it,  and  he  said:  "Yes.     1  could  have  lulnlled  my  estimate  there 

The  Chairman.  I  find  here  in  this  report  of  Herbert  kno.x  bmith: 
"  Mr.  Carnegie's  personal  view  of  the  situation." 

» Thus  in  original.— Ed. 


i 

I 


.J» 


Imikmaikin-  of  U"^"iTrD  States  Stkii.  (\)rpor\ti()\ 


1 1 


That  is  tl  r  tube  situation. 

Mr.  Carnegie's  personal  view  of  the  situation  may  be  authoritatively  stated  as 
follows: 

I'hc  .Valional  Tube  Co.  formerly  obtained  it>  steel  billets  from  the  CarneRie 
Co..  but  decided  to  ereel  blast  furnaus  and  mi'ls  ti.  supply  itself.  .Naturally, 
the  Carnegie  Co.  then  announced  that  it  woul(!  b.;  forced  iJerect  mills  to  linish 
its  own  products  into  tubes. 

The  intention  of  liie  Carnegie  interests  to  e.Mend  their  manufacture  of 
finished  lines  had,  indeed,  been  lonteniplated  for  some  titiie.  In  an  interview 
in  ihe  London  Iron  and  Steel  Tr.ides  Ke\ieu-,  of  .May  12,  i8yy,  .Mr.  Cirne^^ie 
waj  (jUuted  as  say  in;,': 

This  is  from  tliu  Xew  York  Evcninj,'  VnA.  January  :i,  igoi. 

^■es,  we  have  been  ercetinR  several  new  departments,  including  what  I 
believe  will  be  the  largest  axle  factory  in  the  world.  W  hy,  it  mav  be  asked, 
should  steel  makers  make  plates  for  other  firms  to  work  up  into  boilers  when 
they  tan  manufacture  liie  Ijoilers  themselves;  or  beams  unci  girders  for  bridges 
when  they  can  turn  out  and  build  up  the  completed  article;  or  plates  for  pipes 
when  they  can  make  the  i)ipes? 

I  think  the  ne.xt  step  to  be  taken  by  steel  makers  will  be  to  furnish  finished 
articles  ready  for  use.  Tn  the  future  the  most  successful  firms  will  be  those 
that  go  liie  furthest  in  this  direction. 

Mr.  C.\r.m:gh:.  That  projjhc'cy  has  come  true. 

Mr.  Gakdnkr.  I  want  to  ask  Mr.  Carnegie  a  cjuestion,  if  1  may, 
Mr.  Chairman. 

Tlie  Cii.Mi  M.\.N-.  Certainly. 

Mr.  Gardnkr.  In  this  Conneaut  plant  you  [irojiosed  to  smelt  the 
''ron  and  carry  ic  through' 

Mr.  CarneoIK.  Oh,  ye-,  we  propo.-ed  to  have  great  blast  furnaces 
of  the  most  approved  style. 

Mr.  Gardnkr.  You  witc  going  to  take  the  iron  ore  right  oft"  tiie 
Lakes  and  turn  it  into  tubes  and  m;iterial  for  steel  cars? 

Mr.  C.VRNEGIK.  And  listen:  We  had  to  take  ore  down  to  Titts- 
burgli— 150  miles. 

-Mr.  Gardner.  Yes. 

Mr.  Carnegie.  The  ore  would  be  there  at  Conneaut,  coming  right 
off  the  Lakes.  The  cars  would  be  coming  back  empty  from  Pitts- 
burgh, and  there  are  our  coke  works,  and  we  would  load  our  coke 
into  these  empty  cars  and  take  that  fuel  to  Conneaut,  and  the  dif- 
ference between  the  cost  of  hauling  that  coke  to  Conneaut  and  haul- 
ing the  empty  cars  l)ack  would  be  only  a  cent  or  two  per  ton;  the 
dilTercnce  between  a  loaded  train  of  ore  going  down  and  an  empty 
trainof  car?  coming  back  for  train  service  is  onlv  i  cent.  It  co-ts  I'l 
cents  for  train  service  coming  <Iiav!i  and  12  cei,      '"or  the  1*  aded 


J 


114  IXDUSTRIAT.    CmiBlNATIONS   AND   TRUSTS 

cars  Koinq  up.     Wc  xvould  lur,  c  Inul  that  tremendous  advantage 

S  ro'Twon^ler  that  the  steel  cc.v,.any  instead  c.f  ^-^^^^^^ 

h  s  is  my  private  ..pinion,  not  to  be  publ.ely  fF^^jf  ^  ^       J^'^S.l 

dential  [1  4hterl-l  wonder  .j.a  n.t.ad  o  ,om    .  Gar>^>  d^J 

clnlL^^o^cK^Str  ph!;:   iiSJj  of  .Pendin.  double  at 
Sary'Jhe'steS  "toelT.ould  hive  been  worth  nu,re  than  it  >.  to-day. 

^'  Mp'^jioN^K.  Let  me  understand  what  you  just  said  about  train 

'"Umk-r  the  old  system  it  cost  you  i.  cents  for  hauling  the  ore- 

^"  Mr"  ;KN,£u..^S;r^  train  .erviee-the  locomotive,  engineer. 

""""ih  G^RUSVK.  The  actual  cost  of  running  the  train,  without  re- 
spect to  the  cost  of  the  roadbed  or  interest  on  your  money,  and  all 
that,  but  just  the  tram  service? 

Mn  a"uN;"l^:^  you  i .  cents  a  ton  from  Conneaut  to  Pitts- 
burgh, and  1 1  cents  a  ton  to  haul  back  the  empty  cars? 

Mr.  Carnf.gii;.  No 

Mr  KF.F.n,  Sr.  This  was  all  prophetic. 
Mr   r\RN.Gir.   They  were  all  loaded  cars. 
^    •  CV  RUN  :r  In  yoir  proposition;  yes.    Hut  before  >-"  though 
of  Conneaut,  then  you  had  to  haul  your  "-;; -" Jj\  \t? 
Superior  to  Pittsburgh  at  a  tram-service  cost  of  12  cents  a  ton. 
Mr.  (^RM.r.ii..  That  is  v.hat  I  was  told. 
Mr    Rni)    Prom  Lake  Erie  to  Pitt'^burgh? 
N    ■       R   M  R.  Pn.m  Lake  Erie  t..  Pittsburgh;  yes.  I  should  say. 
And  hauUng  back  the  empty  cars  cost  you  xi  cents  a  ton  over  th. 
same  route. ■' 

Mr"  G  ^kr' ih-S;  built  your  plant  at  Conneaut.  it  meant  this: 
Thit\.mr  ore  wouUl  be  landed  at  Conneaut  and  ^^.nlld  be  con- 
verted ntosted  at  Conneaut.  instead  of  going  all  the  way  doun 
to  PittsbuJgh  ^I-nnvhile.  you  would  be  getting  your  coke  from 
an  intermediate  point,  to  wit,  I>o"in? 

Mr    Km  I).  No;  from  Connellsvillc.  ,,     ^  •  1   r  1 , 

Mr  Carnegie.  From  our  own  coke  ovens;  from  the  Fnck  (  .'1 ' 

^"Mr.  Gardnku.  From  .h.   H.  f    Prick  Coke  Co.  ut  Pittsburgh^ 


Formation  of  Umii.i)  States  Steel  Ciiro-oRArioN    115 

Mr.  Rr.i:n.  Connc'lsville. 

Mr.  Carnegik.  Ai  CunnciUvillc,  whidi  i,>  in  the-  Pitt>l)ur<^Ii  re- 
gion. 

Mr.  Gardxfr.  You  would  he  qittinp:  your  coke  in  train?  which  in 
thvir  northward  trip  would  l)e  full,  and  on  their  southbound  trip 
would  be  empty? 

Mr.  Carnei.ie.    Let  me  explain. 

We  had  a  great  many  bla>t  furnaces  at  Pittsburgh,  to  which  we 
had  to  take  ore,  you  understand? 

.Mr.  G.VRDNER.  1  see.  So  that  you  would  have  a  full  'rip  for  the 
cars  both  ways? 

Mr.  Carnegie.  Yes.    We  balanced  the  coke  and  the  ore. 

Mr.  Gardner.  I  see  the  idea.  You  would  haul  your  coke  north  to 
Conneaut,  and  you  would  haul  your  ore  for  your  blast  furnaces  to 
Pittsburgh? 

Mr.  Carnegie.  Yes;  and  tlunfore  the  coke  for  Conneaut  would 
cost  us  nothing,  practically,  for  hauling. 

.Mr.  Gardner.  1  get  the  idea  exactly.  The  transportation  of  it 
w;-.^  so  much  clear  gain,  because  you  had  to  pay  11  cents,  anyway, 
for  those  cars  to  return.    Is  that  the  idea? 

.Mr.  C.VKNEGiE.  Yes.  And  therefore  we  sa\x'd  so  much.  We  got 
our  coke  delivered  at  Conneaut  for  11  cents,  and  we  g!»t  our  ore 
delivered  at   Conneaut  a  great  deal  cheaper  than  at  I'ittsburgh. 

Mr.  Gardner.  I  see.  You  had  a  full  trainload  coming  l)ack,  in- 
stead of  having  an  empty  train  coming  back,  for  which  you  would 
have  had  to  pay  11  cents,  anyway? 

Mr.  Carne(;ik.  My  dear  sir,  the  railroad  had  to  be  maintained, 
whether  the  cars  were  going  up  emjjty  or  not.  Do  you  get  that 
(xiint,  Mr.  Chairman? 

The  Chairman.  .Ml  of  tliem,  and  then  some. 

Mr.  (i  \K!)NER.  I  think  I  understand  that;  but  I  di>  not  think  you 
understand  my  question  that  1  asked  you  a  while  ago.  I  think  your 
counsel  will  explain. 

TheCiiAiRMAN.  Asl  underslani'.your  ruail  had  lob.  iiKiintained? 

Mr.  Carnk(;ie.  Certainly 

'llu  CiiAiRM.VN.  The  same  .umiber  of  cars  had  to  be  run.' 

Mr.   Carnegie.   Certainly 

The  Chairman,  You  had  .n  each  train  a  certain  number  of  empty 
cars,  and  the  only  real  additional  cost,  then,  was  the  train  service  for 
moving  these  empty  cars  along  with  the  other  cars  that  curried  ordi- 
nary freight.     Is  that  it? 


j 


ii6 


Inptstriai.  (  ((Mbinatujns  and  Trusts 


Mr.  Carnecii-..  It  %vas  all  clear  profit.  The  railroad  expenditure?, 
the  interest,  the  deterioration  of  the  railroa.l,  and  all  that  was  t.u 
same.  But  if  y(.u  hauled  an  empty  train  north  to  Conneaut  it  cost 
you  for  service  ii  cents,  because  the  locomotives  used  a  httle  less 
fuel  hauliuK  empty  cars  down  than  it  did  hauhnt;  loaded  cars  up. 

The  Cii  \IRMAN-.  I  sec.    At  that  i)oint,  reahzln^'  these  <ireat  advan- 
tages, you  did     -t  talk  about  that?    That  was  not  generally  known, 

''^Mr.  Carnegie.    \Vc  did   not   publish  it   in   the  newspapers. 

^^'The  OiMRMXN-.  It  was  not  possible  that  Mr.  .Morgan  or  any  of 
these  people  who  owned  the  sf.'el  corporation  ever  knew  that  you 
had  these  big  advantages,  and  that  you  had  already  got  a  site  for 

that  plant,  was  it?  ,        ,       , 

Mr   CxRNTC.i!-.  1  would  not  say  what  they  knew. 
The  Cu  \IRM  VN-.  Was  anvthing  ever  said  about  this  great  steel 

plan;,  that  you  were  going  to  build  and  the  tremendous  advantages 

^°Mr  ^CvRMC.iK.   We  bought  the   land,  and   that  was  kno\yn 
111.'  CiFMRMAN.  ;\n(l  you  knew  what  you  were  going  to  do. 
Mr.  f'.vRNixiK.  Yes;  indeed  we  did.     [Laughter.] 
The  ^'iniRMVN.  There  has  been  some  intimation  that,  even  with 
your  sanguine  temperament,  and  your  long  experience,  that  the 
Carnegie  works,  like  Napoleon  at  Waterkn.,  were  lace  to  face  with 
a  combination  so  extensive,  manned  by  men  so  experienced,  and  su>- 
tained  bv  resources  so  tremendous,  with  Judge  Gary,  for  instance 
in  the  Federal  Steel  Co.,  with  .Mr.  Gates  in  the  Steel  &  Wire  Co.,  and 
with  Mr.  Morgan  as  godfather  an.l  titular  head,  lh.it  with  their 
organi/.ation  outside  of  the  Carnegie  Co.  possessed  sutlicunt  power 
to  have  made  it  no  longer  interesting  for  you  to  have  continued  m 
the  steel  business;  and  that  perhaps  you  escaped  destructive  compe- 
tition by  retiring  from  the  field. 

Was  it  i)ossible  for  the  Carnegie  Co.  to  have  met  these  combint  d 

Mr.  Carnkoik.  Nonsense.  [Laughter.l  Why  did  Morgan  send 
word  to  me  that  he  would  like  to  buy  me  out? 

The  Chairman.  I  understand  that  he  was  uneasy  about  the  con- 
dition of  vour  health,  and  gave  that  as  a  reas<in. 

Mr   CxuNKCiK.  I  was  still  able  to  take  sustenance.    |l-aui.'hl<r.| 

Mr    IUrtu-.tt.  .And  you  were  able  to  take  notice,  too,  1  think. 

Mr  CvRNEGIE.  ThcreisadilT.T.nt  Mory  llian  that.    Uul  do  nut 


I  • 


i 


Formation  <  if  United  States  Steel  Corporation    117 

let  us  go  into  that.  That  is  0  good  c.  Ask  Schnab  about 
Ihat. 

Mr.  Young.  One  gentleman  expressed  it  in  this  way:  He  said 
that  these  gentlemen  who  organized  the  Steel  Corporation  wire 
al)out  to  make  a  very  fine  plum  pudding,  and  that  they  .tscertained 
that  Mr.  Carnegie  had  all  the  plums.     jLaughler.] 

Mr.  Cakxi.c.h:.  Gentlen  n,  it  is  a  great  pity  that  they  ap- 
proached me  and  asked  if  I  would  retire  from  business. 

I  had  formed  my  career,  and  laid  down  the  law  to  myself  that 
I  would  not  spend  my  old  age  in  accumulating  more  dollars,  I 
showed  that  when  we  got  the  olTer  of  $320,000,000  for  our  proj)- 
erty,  and  when  Mr.  Schwab  came  and  sat  down  and  showed  me 
what  he  thought  I  could  get,  I  said:  "Schwab,  it  is  just  as  my  part- 
ners say.  That  is  entirely  satisfactory  to  me.  It  is  all  the  numey  I 
ever  want  to  make." 

I  did  not  realize  then  so  fully  that  it  takes  a  great  deal  more 
anxious  thought  and  labor  to  distribute  money  wisely  than  it  ever 
did  to  me  to  make  it. 

I  do  not  like  to  be  called  a  philanthropist.  That  means  a  man. 
usually,  with  more  money  than  brains. 

You  can  do  more  harm  distributing  money  unwisely,  and  do  more 
to  pauperize  people  than  you  can  do  good,  almost,  in  trying  to 
assist  them. 


I 


CHAPTER  VIT 
FACTORS'   AGREEMENTS 

NOTi: 

The  f:cncral  aim  and  purpc.^c  of  factors'  ^f '•'^X^'"^;^. ;;,/"".,-^^"'^ 
knoNvn  U)  rcMv>iro  any  extended  consuleration  by  the  editor      Ih  v 
may  like  pools  be  established  ^vith  a  variety  of  purpose^  in  ^  u^ 
Primarilv  their  ol>ject  is  t,.  f,x  prices.     But  they  may  1'^/^  "''b 
used  to  suppress  competition  by  re<,uiring  that  the  factor  shall  no 
dea  in  the  LhkIs  of  a  competitor.    Other  ob  ects  may  come  u.thin 
the  scope  o'    he  aj,'reemeit  as  is  shown  by  the  exhibits  folowmfj^ 
The    )r    Miles  Medical  Company  decision,  excerpts  of  M 
l,ave  been  made  a  p.art  of  this  chapter,  dealt  a  severe  blow  to    he 
actors-  agreement.     Hereafter  it  will  probably  prove  a  somewh  t 
er^asrulat^^d  .levice  for  the  furtherance  of  combination  and  consoli- 
dation, and  the  limitation  of  competition.— Ld. 

KXIIIDIT   I 
TABLE  AND  STAIR  Oil.  CLOTH   ASSOCIATION  ' 

This    agreement    made    this.      ...day    of 7'",,;^"};^;';;! 

eicht  hundred  and  ci«hty-scven,  between of  tt     cit>    . 

Sfitc  of  .   ,  partv  ..f  the  hrst  part,  and  the  lab  e 

and  Stair  Oil-cloth  A'^sociation.  party  of  the  second  purt,  wttncssell!: 

f'fr  ?  That  the  party  of  the  first  part  will,  during  tlie  contin- 
uance of  this  agreemeni,  on  or  before  tin-  tenth  day  ^^^^^^^ 
endar  month,  ami  beginning  on  the  loth  day  of  July,  ihS;.  maU 
an    render  to  the  commissioner  of  the  party  of  the  second  pa  t  a 

accu  ate  statement  of  all  «..ods  of .cmn  manufacture,  of 

character  specified  in  schedules  "A  and  15".  hereto  annexed,  old 
in  1  'hipped  by  the  party  of  the  first  part  during  the  preceding 
^LhM  statement  s'hall  contain  the  names  of  the  persons  to 

«  Rcnort  ..f  the  Scn.itc  Committee  on  General  Laws  on  Investifialion  relative 
to  Tru^  N.  Y.  SenuK-  Document,  No.  50,  .888,  PP-  Oog-0.7. 

u& 


Factors'  Agreements 


119 


whom  the  sales  were  made,  and  tht  amount  of  each  kind  of  goods 
siihl  to  each  purchaser;  such  statement  shall  be  verified  by  the 

nath  or  affirmation of  the  party  of  the  iirst  part,  and  some 

rniploye  of having  knowledije  of  the  facts,  and  there  shall 

he  incorjioratcd  in  such  verification  a  statement  that  the  party  of 
the  first  part  has  not  made  any  sales  at  lower  i)rices  or  on  better 
terms  than  those  permitted  by  this  agreement.  Such  statement 
and  verification  shall  be  made  on  blank  forms  to  be  furnished  by 
the  jiarty  of  the  second  part,  and  shall  conform  to  the  recjuire- 
ments  ot  '  such  blanks. 

Second.    That  on  or  before  the  fifteenth  day  of  June  in  each 
year,  the  party  of  the  first  part  will  ])ay  to  the  party  of  the  second 

part  twenty-five  cents  for  each  and  every  piece  of  goods  of 

own  manufacture,  except  goods  specified  in  schedule  "C",  hereto 

annexed,  sold  by during  the  preceding  six  calendar  months. 

and  on  the  fifteenth  day  of  December  in  each  year  twenty-five 
cents  for  each  and  every  piece  of  goods  of own  manufac- 
ture, except  goods  specified  in  said  schedule  "  C,  sold  by dur- 
ing the  preceding  six  calendar  moi^ths.  But  it  is  expressly  under- 
stood and  agreed  between  the  parties  hereto  that  if  any  dividend 
or  debt  duly  audited  shall  be  jiayable  from  the  party  of  the  second 
[»art  to  the  party  of  the  lirst  part,  the  amount  thereof  shall  be  olT- 
sct  against  the  jxiyment  above  provided  for  and  that,  if  after  such 
otTset,  there  shall  be  a  difference  in  favor  of  one  j)arty  as  against  the 
other,  only  such  difference  shall  be  paid  in  cash,  ror  the  purj)osps 
of  this  section,  forty-eight  yards  in  length  of  shelf  oil-cloth,  and 
thirty-six  yards  in  length  of  stair  oil-cloth,  and  twelve  yards  in 
length  of  t.'.blc  oil-cloth  shall  constitute  a  piece. 

Third.    The  party  of  the  lirst  part  further  agrees  that will 

keep  full,  true  and  accurate  books  of  account  of  all  goods  of  the 
character  spccilied  in  said  schedules  "A",  "B",  and  "C",  and  of  all 

such  goods  sold  and  delivered  by during  the  continuance  of 

this  agreement,  including  the  prices  and  terms  of  such  sales,  and 

that will  at  all  times  permit  the  commissioner  of  the  party 

of  the  second  part,  to  have  access  to  such  accounts  and  to  all  mer- 
cantile books  and  papers,  relating  to  this  bu'^iness  of  the  f)arty  of 
the  tirst  part,  for  tlie  purpose  of  comparing  such  books  and  {)apers 
with  the  reports  or  statements  made  by  the  party  of  the  first  part  to 
said  commissioner,  or  for  the  purpose  of  (liscovering  whether  the 
party  of  the  first  p;.rt  has  violated  or  evaded  any  of  the  covenants, 
'  Thu:  in  original. — Ed. 


^ 

^ 


-»' 


,2o  iNL'LsiRJM.  Combinations  and  Trusts 

,„m^  „r  cm.lilions  hereinbefore  or  hereinafter  conuune,!.  and 

mT  vill  all.»v  «a !.  eon,mi..ioner  to  make  extrae.s  from  ,„eh 

tok  ana  paper,  tor  .he  purpose  ul,ove  spenned     And    he  ,«,    > 

fr''''Hn:;:j,;li^;'^veSi;;;n:rti;.oner-;;:s,a^ 

^llnnformatiori'n I'y  examination  instituted  l,y  the^^l  cutn- 

mi^^inncr  for  the  forc!,n>in<^  purporiC,  and  that •  •  -a.iu 

'^'-::::^L  .il,  answer  under  oath,  if  .^1  comnns.oner  ..^n. 

^:;r^ic^;?;  ?Sr.!;^.^  a,reen.ento:  a:^  sinu^^^^ 
ihiciti  party  of  the  second  part  may  have  ^vlth  ot  ur  parties 
ourh     The  partv  of  the  hr.t  part  further  agrees  that.  .     will 
no   du   n,  the  continuance  of  this  agreement  sell  any  «oods  o.  the 
ki misCcified  in  schedules  "A",  "B"  and  -C    .  hereto  annexed 
aJ  itTprilxs  than  nuy  from  time  to  time  be  tixed  by  the  party 

"^  ^r  Se  n;iS;[\^osc  prices  are  hxed  in  accordance  .  ith  schedules 
.■  V^  '  ir  and  "C",  but  such  prices  may  Irom  t.me  to  .me  be 
changed  bv  the  party  of  the  second  part,  and  the  party  "[the  first 
part  agree;  that  on  receiving  notice  per^t.nally  or  l,y  nuul  or  tele- 
gram of  such  changes  will  forthwith  advance  pnces  to  conform  to 
nnv  idvance  made  by  such  changes.  . 

hS  U>t  it  i^  understoo<l  that  the  party  of  the  Urst  part  shall 
be  at  liberty  to  promise  the  following  rebates  to  be  paid  at  the  t.me 
ami  in  the  manner  hereinafter  provided: 

To  purchasers  buving  in  any  one  season  from  men.ber>  n  !u 
Table  an.i  Stair  Oil'CMoth  Association,  250  pieces  or  over  ot  tahk 
ni'l-rloth   a  rebate  of  fifteen  per  cent.  . 

To  thoi  buying  in  any  one  season  500  pieces  or  over  of  table  oil 
cloth  a  rebate  of  seventeen  and  one-half  per  cent. 

To  those  buving  in  any  one  season  100  pieces  or  over  of  shelf 
goods  of  twelve  yards  each,  a  rebate  of  fifteen  per  cent. 
^  To    hose  buy  ng  in  any  one  season  .50  pieces  or  over  of  shel 
goods  of  tu.lveyar<ls  each,  a  rebate  of  seventeen  and  one-half  per 

'"to  those  buying  in  any  one  season  twenty-five  pieces  of  stair  oil- 
cloth, a  rebate  of  ten  i)er  cent.  _  -1  ^i^*u  ., 
To  those  buying  in  any  one  season  t.fty  pieces  of  stair  oil-cloth,  a 

rebate  of  fifteen  per  cent. 


Factors'  Agreements 


121 


To  lhu>c  buyin;^  in  any  one  reason  loo  pieces  of  slair  oil-clolh,  a 
rcl/ate  of  seventeen  and  one-half  per  cent. 

Hut  it  is  understaod'  that  pieces  of  stair  oil-cloth  .4iall  not  average 
ii.~^  than  sixty  yards  to  the  piece. 

.S'/.v///.  That  no  allowance  to  any  purchaser  lor  damaged  goods  or 
for  g(>ods  returned  or  for  any  other  reason  shah  he  niado  except,  by 
the  consent  of  the  commissioner  of  the  party  of  the  second  part. 
Seventh.  But  it  is  expressly  agreed  by  the  party  of  the  first  part 
that.  .  .  .will  not  i)romise  such  rebate  to  any  purchaser  who  does  not 
expressly  agree  that.  .  .  will  not  sell  any  good--  of  the  character 
si)ecilicd  in  Schedule  "A",  whether  nuinufactured  b\  the  members 
of  (he  party  of  the  secon<l  i)art  or  others,  at  lower  prices  or  on  better 
trrms  than  those  lixed  by  said  schedules  as  the  same  now  stands  or 
a>  they  may  hereafter  be  amended;  and  upon  the  express  condition 
that  such  rebate  shall  only  be  paid  in  case  the  purchaser  has  main- 
t.iined  such  prices  and  terms,  and  upon  the  further  condition  that 
tlie  commissioner  of  the  party  of  the  second  jjart  >hall  have  the  sole 
power  to  determine  u  hellar  ^uch  purcha:-er  has  violated  ^u(■h  agree- 
ment. 

y-:/;'/////.  And  the  party  of  the  first  part  further  agrees  that  if  any 
purchaser  of  the  goods  named  in  Schedules  '"A"  "B"  and  "C" 
shall  sell  such  goods  at  less  prices  and  on  better  terms  than  those 
from  time  to  time  prescribed  by  the  party  of  the  siconil  part,  or 
shall  supply  goods  to  any  one  selling  below  such  prices  and  terms 
alter  receiving  notice  from  the  said  eomnii->ioner  re(|uesting  him  not 
1(1  supply  such  persons  with  goods,  the  i^arty  of  the  first  part  will 
immedia'tely  on  receiving  notice  that  such  purchaser  has  sold  goods 
at  less  than  the  jjrices  and  terms  lixed  by  the  association,  or  has 
sujiplied  goods  to  othc .  not  maintaining  the  {)rices,  and  terms  fixed 
l)y  this  association,  cease  selling  goods  to  such  purchaser,  and  will 
cancel  any  unfilled  orders  given  l)y  such  purchaser. 

\mth.  '.Vnd  the  party  of  the  lir<l  part  further  agrees  that  in  case 

shall  be  notified  by'the  commissioner  of  the  jnirty  of  the  second 

part  that  any  purchaser  has  violated  such  agreement,.  .  .  .will  not, 
directly  or  indirectly,  pay  such  juirchaser  the  rebate  to  which  he 
would  otherwise  be  entitled;  and  that  after  the  receiiit  from  said 

lommissioner  of  such  notitication will  not  sell  such  purchaser 

any  goods  at  lower  jiriccs  than  full  list  prices,  cash  on  delivTy, 

without  (liscouni ;  and  that.  .  .  .will  not  thereafter  otTer,  or  promise, 

or  pay  such  pun  baser  any  rebate  wluitever  on  goods  bought  by  him, 

'  Thus  in  original. — Ed. 


Ixni'STRIAI. 


CoMr.INATIONS   AND   TkUSTS 


122 

except  by  ihc  written  consent  of  the  party  of  the  second  part 
■  The  rebates  above  provided  for  shall  not  be  pai  l  unfl  the  e^i.l  uf 

'  Ve>Si'^\t  the  end  of  each  season,  and  witliin  one  week  there- 
after tlie  party  of  the  fn-t  part  s'nall  report  to  the  commissioner  o 
?hc-  party  of  the  second  p.rl  the  amount  of  cvich  kind  oi  ^oods  sokl 
durint^hc  season  to  each  purchaser.     If  the  said  comnnssioner 
shall  be  satisfied  that  the  purchaser  has  not  violated  h,s  agreemen 
to  nKuntain  the  price  and  terms  fixed  by  the  ,;,arty  ot  the  secoijd 
part    and  has  purchased  sufTicient  to  entitle  him  to  a  rebate,  the 
sai^  c  mmi^^ioner  shall  send  to  such  purchaser  a  si^ht  draft  upon 
he  partv  of  the  first  part,  for  the  amount  of  the  ^^''-te  due  rom  the 
party  of'the  first  part,  and  the  said  commissioner  sliall,  a    the  same 
Uml  notify  the  party  of  the  first  part  of  the  fact  that  he  has  drawn 
and  sent  such  dratt.  ,•     v      . 

Flrentli     But  it  is  further  understood  bct^^•een  the  parties  hereto 
that  soods  may  V>e  sold  to  purchasers  transacti.i^  buMne>s  out^ule 
of  the  United  States,  at  the  prices  and  terms,  and  on  the  condition, 
prescribed  in  schedule  "  b",  hereto  annexed;  but  such  prices  terms 
and  conditions  mav  from  time  to  time  be  altere.l  by     le  ixirty  of  the 
second  part;  and  the  party  of  the  f  r.t  i^irt  agrees  that  on  rece.x.ng 
notice  of  such  chan.i^es  from  the  party  of  the  second  part.  . .  . .  .will 

immediatelv  change  the  prices,  terms  and  conditions  of  such  sales, 

in  conformitv  with  -uch  alterations.  r .,     r    .      ,« 

T-^rlfth.    It  is  further  understood  that  the  party  of  the  first  part 

,tiall  b'e  at  libertv  to  sell  j^oods  specified  in  Schedule   "A  ,  to  any 

member  of  the  Table  and  Stair  Oil-Cloth  Association  at  a  discount 

of  1 7-'  -^  per  cent  from  the  prices  named  :n  Schedule    A    in  \\  nai- 

cver  quantity  such  goods  may  be  sold.  ,       ,      ,    .,         „,„„ 

Thirkcnih.     The  party  of  the  first  part  hereby  further  agree. 

tint  will  not  except  bv  ccmsent  of  the  party  of  the  second 

paVt,'  coat,'  iinish,  or  print  any  goods  of  the  character  spec.iied  in 

Schedules  "  A",  "  li"  and  "  C"  for  any  party  (except  members  of  the 

Tible  and  Stair  Oil-Cloth  .\ssociation)  who  contrioutes  either  by 

purchase  or  any  other  way  any  portion  of  the  materials  used  in 

^uch  good<.  .      ,  ... 

I'OurUnith.    The  partv  of  the  first  part  lurthcr  agrees  that.    .... 

"ill  not  sell  goods 'specified  in  Schedule  "A"  on  better  terms 

of  credit  than  sixtv  davs  from  date  of  invoice,  with  an  allowance  of 

two  per  cent  for  cash  within  th,rty  days  of  date  of  invcnce,  aini  fou 

per  cent  for  cash  paid  witliin  ten  days  of  date  of  invoice,  an^  m 


Factors'  AGRiXMKNTS 


I -^3 


additional  allowance  at  the  rale  of  one  per  cent  per  month  for  pay- 
ments made  i)rior  to  the  day  on  which  invoices  may  be  dated,  and 

the  party  of  the  iirst  part  further  af,'rees  that will  in  no  case 

allow  the  above  discounts  except  'or  cash  actually  paid  or  remitted 
on  or  before  the  expiration  of  the  periods  above  named. 

b'iftccnlh.  It  is  further  agreed  that  such  ca^h  discounts  shall  only 
be  allowetl  on  invoices  of  j:;oods  actually  shipped,  and  not  on  money 
paid  in  advance  or  anticipation  of  shipments,  and  that  all  invoices 
of  Koods  shipped  between  August  first  and  December  hrst,  and 
between  February  lirst  and  June  hrst  of  any  year  shall  date  from 
the  day  of  shipment,  and  the  invoices  of  goods  shipped  between 
June  lirst  and  Au^u^t  lir^t  shall  not  dale  later  than  Auji;ust  first, 
and  all  goods  shipped  between  December  iir^l  and  Feljruary  first 
shall  not  date  later  than  I'ebruary  hrst. 

Sixteenth.    And  the  parly  of  the  hrst  part  further  agrees  that 

will  not  sell  goods  of  the  kinds  specified  in  Schedule  "  C  hereto 

annexed  on  any  other  terms  than  those  prescribetl  in  said  Schedule 
"C",  but  such  terms  and  conditions  may  from  time  to  lime  be  al- 
ttred  by  the  party  of  the  second  part,  and  the  parly  of  the  first  part 
agrees  "thai  on  receiving  notice  of  such  alterations  from  the  party 
of  the  second  part will  immediately  change  terms  and  con- 
ditions of  such  sales  in  conformity  with  such  alterations. 

Sci'CHtecHtli.    That  neither  the  party  of  the  first  i)arl  n()r  any 

agent,  agents,  employe  or  employes  of will  pay  any  freight 

to  any  purchaser  or  io  any  dealer  or  to  any  agent  ol except 

that  the  jxirty  of  the  hrst  part  may  pay  freight  to  New  York,  I'hila- 
iklphia,  Baltimore  and  Newark,  and  expressage  or  freight  on  i)ack- 
.:es  delivered  in  Brooklyn,  \ViIliam-^l)urg  and  Jersey  City,  but  that 
goods  mentioned  in  .schedule  "C"  may  be  delivered  freight  paid  in 
Boston,  Mass. 

Elghtenith.  That  the  party  of  the  hrst  part  will  not  dinctly  or 
indirectly  otTer  or  give  to  any  purchaser  or  the  employe  or  agent  of 
any  purchaser  or  to  any  one  whomsoever,  any  gift,  bril)e  or  pecu- 
niary advantage  (outsitle  of  the  intrinsic  value  of goods)  for 

the  i)ur])(ise  of  obtaining  orders  for  or  elTecting  sales  of  goods. 

Mnitcoith.  That  the  party  of  the  first  part  will  not  carry  any 
-tock  of  goods  in  anv  place  or  places  other  than  New  York,  Phila- 
delphi,'  Newark,  Montrose,  N.  Y.,  Astoria  and  Plainheld. 

T:irntirth.    'I'hat  the  party  of  the  first  party  will  take  no  orders 
between  November  30,  an<rMay  ;>i,  in  any  year  except  upon  the 
>  Thus  in  original.— Ed. 


.aii 


n 


124  Industrial  Comiunation-s  anu  'lursrs 

distinct  asrcmcnl  with  the  purchaser  that  any  unf.Hed  portion  of 

he  order  sliall  be  cancelled  -n  the  thirty-hrst  ot  May,  and  that.  .    . 

vi  1   ake  no  order,  between  May  ,1,  and  November  30,  >"  any  year 

except  upon  a  .imilar  agreement  that  any  unuUed  por  u.n  ol  the 

order  .hall  be  cancelled  on  the  thirtieth  day  ol  Nove.nber 

%cn^-first.  For  the  purpose  of  this  agreement  a  year  is  divuled 
into  two  seasons,  one  extending  from  May  ,31  to  and  mc  ud.ng 
November  'o,  and  the  other  from  November  30,  to  and  u^cluchn, 

^^Tu;i!dy-second.  And  the  party  of  the  rtrst  part  exprcs.ly  agrees 
that  will  not  in  anv  sea.on  make  any  contract  or  agreement  f  r 
,h,  future  delivery  or'sale  of  goods  cxtendmg  '-vond  >uch  sc...on 

nor  will   emote  or  name  prices  for  goods   o  be  >old  or  ere 

alter  the  current  season  except  by  consent  of  the  party  of  the  scvond 

^%entHlnrd.    The  party  of  the  first  part  further  a?^rces  that 
will  make  no  guaranty  as  to  any  matler  whatsoever  exctpt  the 

(mantity  and  qualitv  of  goods  sold  by 

^TicMourtl  That  the  party  of  the  l.r.t  part  will  not  show  sam- 
ples of  new  styles  of  goods  and  will  not  solicit  "^;^'l;->--;  7;^,;'J^;;'i; 
new  styles  of  goods  for  the  season  between  June  lir.t  and  ^^,1 
?i  t  rior  to  June  first  in  any  year,  or  lor  the  season  between 
December  first-^and  June  first  before  December  hrst.and  that  all 
original  sample  books  shall  be  of  the  uniform  size  of  nme  inches  b> 
twelve  inchJs,  and  that  all  sample  books  sent  to  the  tr.ule  sha  1 
cut  of  the  uniform  size  of  seven  inches  by  nine  inches  and  that  tl  e 
I^rty  of  the  fir>t  part  will  supply  sample  books  of  no  other  Mze 
whether  T)aid  for  or  not.  .        ,, 

rwaillt'fth.  That  the  party  of  the  n.t  part  will  require  all 
saten  aiHi  agents  in,  .  .  .'  .employ  to  sign  and  swear  t.,  a  wn  en 
promise  binding  thena  to  maintain  the  prices  and  •-'""^/;-;  ''>  ^^  ^.^ 
party  of  the  second  part;  that  they  will  an>wer  under  -j^      '  '^^  ^uc  - 

ions  that  may  be  put  to  them  by  the  commissioner  of  the  party   .1 

he  .ccond  pl-t,  in  any  examinations  that  may  be  instituted  to 
in  lor  the  purpose  of  ascertaining  wb-'ther  this  agreement  or  any 
S  nilar  agreement  has  been  violated   that  tijey  will  divide  no  con- 
n.i>,ion  with  purchasers,  and  that  they  will  "^''^her  olTer  or     p- 

inv  nionev,  gilt,  bribe.  <,r  other  valuable  inducement  m  one   to  ob- 
tZ  an  or^ler  for  or  effect  a  sale  of  goods,  and  the  party  of  the  h^ 

part  agrees  that  on  being  informed  by  >.id  comnu.r,ioner  that  any 

'  Thus  in  original.— I".J. 


Fa(  tors"  A(;Ki;!..Mi;NTS 


12; 


salesman  or  a.irent  h;is  vioUitcil  mji  h  i)r(imi>f.  .    .will  immediately 

discharge   him   from employ,   and    that .will    not 

I;nowin,t;ly  employ  any  salesman  or  agent  who  has  been  discharged 
from  the  employ  of  any  other  manufacturer  of,  or  dealer  in  table, 
stair  and  shell  oil-cloths  for  such  an  olTence. 

Ticcnly-sixHi.    And  the  party  of  the  llrst  part  further  agrees  that 

Will  employ  no  person  or  persons  as  agent  or  salesman  who 

is  interested  in  or  connected  with  any  concern  engaged  in  the  pur- 
chase and  sale  of  oil-cloths,  and  that will  employ  no  agent  in 

the  place  where own  store  or  factory  is  located,  and  that.  .  . 

will  not  pay  any  agent  a  higher  commission  than  three  per  cent  on 
goods  sold  at  the  agent's  place  of  busine>s  or  residence,  and  not  more 
than  t"ive  per  cent  on  goods  sold  elsewhere,  such  commission  to  cover 
all  travelling  and  other  expenses. 

T-d'cnty-scvcnlh.  That  on  or  before  the  first  day  of  Jum,  1SS7, 
the  party  of  the  first  part  will  de])osit  with  the  party  of  the  second 
part  the  sum  of  S in  cash  or  converlilile  securities  satis- 
factory to  the  partv  of  the  second  part,  to  be  held  by  the  party  of 
the  second  part  as'  security  that  the  party  of  the  first  part  will 
l)r()mptly  pay  to  the  party 'of  the  second  part  any  sum  or  sums  of 
money  which  may  at  any  time  become  due  or  jiayable  from  to 

the  party  of  the  second  part  under  any  of  the  provision.-,  of  this 
agreement. 

Ti.rnty-cighlh.  That  if  any  such  payment  sliall  become  due  and 
remain  unjiaid  for  the  period  of  one  week,  it  shall  be  lawful  for  the 
party  of  the  second  part  to  take  the  amount  thereof  from  any  funds 
in  its  hands  belonging  to  the  party  of  the  first  part,  or  if  such  funds 
are  insulTicient,  to  sell  at  public  or  private  sale,  without  demand  of 
pavment  and  without  notice  of  the  time  and  place  of  such  sale, 
sutl'icient  of  the  securities  deposited  with  it  by  the  party  of  the  first 
part,  and  out  of  the  proceeds  of  such  sale  to  take  and  retain  the 
amount  of  such  jxiyments,  and  it  shall  be  the  privilege  of  the  party 
of  the  second  part"  to  be  the  purchaser  at  any  such  sale. 

T'MUly-niulh.  f  h at  the  party  of  the  first  part  will,  at  the  demand 
of  the  party  of  the  second  part,  make  good  any  deficiency  which 
may  arise  in  the  cash  or  securities  so  depi)sited,  whether  such  defi- 
ciency be  caused  by  depreciation  in  market  valiie  or  by  deduction 
made  in  accordance  with  the  jireccding  provisions. 

Thirlklh.    That  if,  at  any  time,  the  party  of  the  first  part, 
shall  refuse  to  give  the  commissiimer  of  the  party  of  the  second 
part  access  to mercantile   books,  accounts,  or   papers,   or 


'^i 


126  Industrial  Comiuxatioxs  and  Trusts 

sliall   refuse   to   permit    the   examination   of employes, 

or  shall  refuse,  when  reriuested,  to  irive  accurate  and  full  informa- 
tion touching;  anv  matter  relatin<;  to  the  sale  or  delivery  of . 

Roods,  in  any  case  where  the  said  commissioner  is  authorized  by 
this  a'srecnu'iit  to  rcHjuest  such  examination  and  information;  or 
shall  wilfully  make  and  render  to  the  party  of  the  second  part,  or 
its  commissioner,  anv  false  statement  as  to  the  amounts  and  kinds 
of  Roods  sold  and  delivered  by ;  the  name  of  the  pur- 
chaser to  whom  sales  or  deliveries  were  made  or  as  to  the  prices, 

terms  and  conditions  of sales,  or  shall  wilfully,  directly  or 

indirectly  perform  any  acts  tending  to  nullify  or  evade  this  agree- 
ment, or  any  of  its  terms,  the  party  of  thj  lirsl  p.irt  will,  on  con- 
viction thereof,  in  the  manner  [irescrihed  by  the  by-laws  of  the 
party  of  the  second  part,  forfeit  and  pay  to  the  party  of  the  second 
part^  for  each  and  every  offence,  the  sum  of  8500,  which  sum  is  here- 
by fixed  by  the  jiarties  hereto  as  liquidated  damages,  and  in  case 

the  partv  of  the  first  part  shall  either or  through 

empK)ye's  directly  or  indirtctly  fail  to  maintain  the  juices,  charges, 
terms  and  conditions  re(|uire(i  by  this  agreement,  shall  pay  to  the 
partv  of  the  second  part  S.^oo,  as  li(iuidated  damages  for  each  and 
every  olTcnse,  and  in  case  the  party  of  the  first  part  shall  sell  to  any 
one  purchasiT  during  any  one  season  more  than  500  pieces  at  lower 
prices,  or  on  better  terms  than  those  permitted  '  y  thir,  agreement, 
the  party  of  the  first  part  shall  in  addition  pay  to  the  party  of  the 
second  part  one  dollar  for  each  and  every  piece  in  excess  of  500  so 
sold,  which  sums  are  hereby  llxed  by  the  jiarties  hereto  as  liqui- 
dated damages,  and  the  sum  of  Sioo  as  liquidated  damages  for  any 
failure  to  make  the  statement  or  reports  required  by  this  agreement 
within  the  lime  limited  therefor. 

Thirtx-first.  In  con.->ideration  whereof,  the  party  of  the  second 
part  agrees  to  sell  the  party  of  the  first  part,  at  par certif- 
icates of  mcmbershiiis.  such  certificates,  however,  to  be  always  held 
subject  to  the  conditions  imposed  by  the  by-laws  of  the  party  of 
the  second  part,  and  subject  to  redemption  purchase  and  l\)rfeiturc 
in  the  manner  prescribed  by  said  by-laws. 

Thirty-second.  .\nd  the  party  of  the  second  part  further  agrees 
that  it  will  use  all  proper  etTorts  to  further  the  business  interests 
of  the  party  of  the  first  part,  and  that  it  will  olTer  suitable  rewards 
to  secure  the  conviction  of  any  manufacturer  who,  having  with  the 
party  of  the  second  part  an  agreement  similar  to  this,  shall  violate 
the  same  or  any  part  thereof. 


Factors'  Agreemexts 


127 


TInrty-third.  It  is  mutually  agreed  between  the  parties  hereto 
I  hat  the  eommissioner  of  the  [)arty  of  the  second  part  shall  decide 
.my  (juestions  which  may  arise  as  to  the  meaning;.  C()n>tructi()n,  or 
ifiterpretation  of  this  agreement  or  any  i)art  thereof,  and  tliat  his 
■  lecision  shall  be  final  and  conclusive  ui)oii  Ijoth  tlu  partii-  hereto, 
i.uth  as  to  the  cjuestions  of  law  and  fact. 

Tliirly-foiirlh.  It  is  further  agreed  between  the  parties  heretu 
that  if  the  party  of  the  first  part  is  accused  of  any  vi(jlatiun  01  this 
a,i,'reenient  such  accusation  shall  be  referred  to  said  commi>sioner, 
whose  decision,  subject  only  to  the  conditions  imposed  by  the  by- 
laws of  the  party  of  the  second  part,  shall  be  fmal  and  condu.Mve 
ui)on  both  the  parties  hereto,  both  as  to  law  and  fad. 

Thirty-fiflh.  Whenever  the  word  "goods"  occurs  in  this  agree- 
ment, it  shall  be  construed  to  mean  and  include  only  table,  stair, 
-helf,  and  enameled  oil-cloths. 

'I hirty-sixtli.  That  as  to  making  the  reports,  statements  and 
payments  required  Ijy  this  agreement,  this  agreement  shall  continue 
m  torce  up  to  and  including  the  fifteenth  da\  of  June,  188S,  and  as 
to  other  matters  up  to  and  including  the  thi'rty-first  of  May.  iSSS. 

In  witness  whereof,  the  jxirty  of  the  tirst  part  hath  hereunto 

st-"t and   the   party   of   the   second   part    hath 

caused  these  presents  to  be  signed  by  its  president. 

KxiuruT  2 

AMERir AN    TOBACCO    COMPANY  ' 

P.  O.   Box   25QI. 

Xew  York,  October  i.  i,Sg5. 

Dear  Sir. — We  will  be  glad  to  consign  to  you  for  sale,  on  commis- 
Mon,  our  various  brands  of  cigarettes,  such 'cigarettes  to  be  sent  by 
us,  and  received,  sold  and  accounted  for  by  you,  upon  terms  and 
conditions  as  follows,  namely: 

I'ir^t.  -AH  cigarettes  which  we  may  send  to  you,  you  are  to  sell 
to  the  retail  trade  onl}  for  retail  purposes;  you  are  to  sell  none  to 
"ther  than  retail  dealers  exce[)t  by  our  written  permission. 

Second.  You  shall,  at  all  times,  sell  our  cigarettes  at  such  prices 
only  as  we  may  fix  in  selling  lists  sent  to  you.  You  shall  not  sell, 
or  di.-^pose  of,  any  cigarettes  at  lower  prices  than  those  so  fi.xed.' 

'  Report  and  Prncec(lin<;s  of  the  Joint  Committee  of  the  Senate  and  .-\ssem- 
I'ly  apiioinU'il  to  investigate  Trusts.     X.  V.  .ScuaiL-  Uucumeni.-,,  \o.  40.  1807 


128 


TNinSTRIAT.    r<iMr,tNATION'=;    AND   TrI'STS 


Third  \^>u  arc  to  miaranttc  all  ^alo  made  by  you.  An  extra 
compensation  of  2  per  etnt.  will  be  allowed,  and  ran  be  dcluettd 
bv  you  on  all  advances  made  upon  consij,mments  which  arc  re- 
mitted to  u>  wilhin  ten  days  after  the  (bite  ot  >hii)nunt  ' .>  you. 

Fourth.  All  ciL'arcttcs  consigned  to  you  are  to  remain  our  ym.p- 
crtv  until  sold  bv  vou,  subject  only  to  your  lien  t hereon  for  all 
advances  which  vou  have  made  under  the  terrn-^  o!  tlu^  asncnient. 

Filth.  'I'he  co<t  of  freiiiht  from  our  factoric-  i-  to  be  paid  Ijy  us, 
or,  if  jiaid  by  \"\\.  to  be  allowed  to  >:iu  by  Vi-  on  account. 

Sixth.  Vou' are  to  guarantee  us  against  lo-s  by  lire  or  other- 
wise of  any  cij:;arettes  con-ii;ned  to  you,  and  you  are  toeitli'  1  re- 
turn to  us  the  cif^aretto  in  i;ikk1  condition  or  the  price  of  the  same 
as  fixed  on  our  selHn-  li-ts  ..s  above  mentioned.  Vou  are  abo  to 
pav  all  charges  and  other  expenses  of  <'v.  ry  nature  connected  w:th 
the  Moriim,  keeping  and  seliinR  of  cigarettes  which  we  may  coiiH.^n 
to  you,  or  for  v<Hir  account,  alter  the  delivery  thereot  by  u.-,  to  the 
common  carrier,  including  all  State,  county  and  municip.il  taxes 
and  license  fees.  .  . 

Seventh.  If  you  do  not  di>criniin,ite  a.t;ain>t  our  ci,u':irettes_in  ta- 
vor  ol  tho>c  of  otlier  manulacliire,  and  if  you  do  not  ~cll,  or  (lisi)ose 
of,  any  of  our  cii;,iretli-  at  le>s  than  the  li>l  i)rice,  .i.id  il,  in  all  re- 
beets',  you  complv  with  the  terms  of  this  agreement,  we  will  pay 
you  a  commission  of  two  and  onedi.df  (2-'  ..)  per  cent,  on  the  amount 
realized  by  you  from  the  sale  of  the  cigarettes  which  we  may  con- 
sign to  vou. 

FiLdith.  If.  however,  vou  handle  cigarettes  of  our  manufacture 
CNclusivi  Iv,  and  do  not  s'ell  or  di>tribnte,  or  in  any  %vay  aid  in  the 
sale,  or  di'-tribution  of,  cigarettes  of  other  manufacture,  and  if  you, 
in  all  respeets,  fully  comply  with  the  terms  and  conditions  of  this 
agreement,  we  will'pay  you  an  additional  commis.-^ion  of  seven  and 
one-half  (7-,' 2)  per  cent',  on  the  amount  realized  by  you  from  llie 
sale  of  the  cicarittcs  which  we  may  consign  to  you. 

Nintli.  Si  ttlements  and  payments  of  commissions  arc  to  be  made 

as  follows: 

On  April  i,  iS(j{),  or  as  soon  thereafter  as  practicable  on  .ill  cig- 
aiettcs  consigned  by  us  to  you  from  the  date  of  your  signing  this 
contract  to  January  i.  iSof),  which  have  been  sold  by  you  and 
settled  for  i)rior  to  Ajjril  i,  iS'/). 

On  July  I,  i8q6,  or  as  soon  thereafter  as  pr.icticablc,  on  all  cig- 
arettes consigned  bv  us  to  vou  during  tlie  three  months  emling 
April  I,  iSf/),  whi'  h  have  bein  sold  by  you  and  settled  for  prior 


Factors"  Agreemlxts 


129 


to  July  I,  iSo6,and  so  onjmm  quarter  to  quarter  thereafter  in  the 
.-ame  manner,  for  the  suljsetiuent  consignnu  rit.s  sales  and  payments 
■  '  'u^^' ,  -■^"/'''''"'if''^"s  up™  our  part  to  j)  iv  v„u  anv  com'n.ission 
lur  the  sale  of  the  cigarettis  uhich  we  may  con^i^ni  to  you  is.  and 
_-hall  be.  dependent  upon  your  strict  compliance  wiih  the  a-reement 
iuTembelore  contained  that  vou  will  not  sell  any  of  our  dgarettes 
lor  a  less  i)nce  than  that  lixed  in  our  selling  lists  sent  to  you  If 
yni  should  sell,  or  dispose  of  anv  of  our  cigarettes  at  le^s  than  «uch 
price,  you  shall  forfeit  all  right  to  the  pavnunt  of  anv  commis- 
sions on  cigarettes  which  you  may  have  previously  soM.  and  on 
which  commrsions  have  not  been  paid  vui,  and  you  shall  at  once 
Ou  demand,  pay  to  u^  the  h'st  jirice  for  all  cigarettes  which  vou  haNe 
sold  and  deliver  t..  us  all  of  our  cigarettes  then  in  your  iio^.^e-iun 
which  may  iiave  lieen  pri'viously  consigned  by  11s  to  you. 

l.'eventh.  Upon  your  accep'tance  in  writing  of  tlie  terms  and 
OMiditions  01  this  agreement,  you  under>taiid  and  agree  that  you 
will  handle  our  cigarettes  exclusively,  on  the  terms  and  conditions 
hcreit:  specitied,  and  in  the  event  that  vou  hereafter  determine 
I.,  sell  cigarettes  of  oiher  munutaelurc.  vou  are  to  notifv  u^  in 
writing,  of  such  determination;  a.ul  thcruifter.  if  vou  haVe  fully 
com[)ile(l  with  all  olher  terms  of  tliis  agreement,  tiie  con;mis.ions 
to  be  paid  to  you  for  sale  of  our  cig.ireUes  luill  W  at  the  rate  of 
two  and  one-half  (:-lj)  per  cent. 

Iwelfth.  Ifyoushallsellordi^tribute,  orinanv  \  ay,  dinetly  or 
indirectly,  aid  in  thesalcordislril)ution  of  any  oilier  cigarettes  than 
those  of  our  .Manufacture,  ril!;oul  having  i.rst  given  us  written 
notice  of  your  intention  so  to  do.  as  rc(iuired  by  paragraoh  eleventh 
you  shall  rot  be  entitled  to  daim  or  reccv  e  any  conu'ni-ions  not 
previously  paid  to  you  in  e.\Cf,-,sof  two  and  one-half  f >'  ,)  per  cent 
•m  any  past  or  future  sales  under  this  agreement;  and  the  right  .md 
option  IS  hereby  distinctly  reserved  to  us  to  determine  a.,  1  declare 
that  you  have  surrendered  all  right  to  be  paid  any  .omiri^sion  over 
said  rate  of  two  and  one-half  p.  r  cent.,  if  we  shall  be  satisfied  that 
\.Hi  have  111  any  way  aided  in  the  sale  or  distribution  of  cigarettes 
<'t her  than  those  manufactured  by  us. 

rhirtecnth.  We  reserve  the  right  of  determining,  at  all  times 
;i;^  to  the  number  of  cigare'tes  and  the  braiuU  which  we  will  eon- 
Mgn  to  you  under  this  agreement,  we  to  determine  the  matter  be- 
fore or  after  receiving  requests  or  reports  from  you;  and  you  ex- 
pressly agree  that  you  will  promptly  make  reports,  or  account  of 
-11  suics,  to  us,  wliencver,  and  as  often  as,  wc  may  call  for  (he  same 


in!: 


130  iNDrSTRlAl.   ("OMHINATION:^    AND   TRUSTS 

Fourtc'enlh.  Fhc  riRhl  is  reserved  to  us  at  any  time,  to  decline 
to  sell  vou  auv  .n.,re  ei<:arettes,  and  to  with.'raw  the  c.garetles  al- 
ready consi«ne<l  to  vou,  upr.n  repaying  to  you  all  your  k-Ritimate 
advances  thercun.  and  llie  ri-ht  i-^  re^ervc.l  to  you,  at  any  tune 
to  deeline  to  :,et  lurlh.r  for  u^.  aller  havih-  delivered  to  us  all 
ci'ftarettes  tin-,,  in  your  lumds,  and  payinj;  over  to  us  the  proceeds 
of  all  sales  of  our  cigarettes  at  list  price. 

Fifteenth.  Requests  for  consignmenl>.  as  well  as  all  ad\  ances  an  1 
rcporl.  of  sales  with  New  York  exchange,  niu.-l  be  paid  to  our  .^^lice 
in  New  York.    C-onunis>ions  will  al^o  be  ^ettled  and  paid  from  there. 

Sixteenth.  No  eniplove  of  this  company  has  any  authority  what- 
ever to  change  or  modify  this  agreement,  or  any  circular,  letter, 

or  price  list  of  this  company.  .  •        ..        „ 

Your  agreement  in  wrumg  hereon  to  receive  our  cigarette,  on 
consignment  and  lo  s.ll  and  account  for  the  same,  under  the  above 
coi.litions  when  executed  by  you.  will  u,nslitute  a  bmdmg  con- 
tract between  vou  and  our  comi)aiiy. 
Very  Irulv  vours, 

iuL  Ami:rican  Tod.\cco  Comi-any. 

a.'ree  to  receive  ci-arettes  on  con-ignnieiU  irom  itie 
American  T..krcco  C.miuny.  and  to  sell  the  same,  and  to  account 
to  said  company  there  ior.  upon  the  terms  an.l  conditions  se  forth  m 
thef..regoingw'ritt.nprnpositiontous.  To  the  laithul  performance 
,,1  :dl  ^u'  li  term  ,  and  condition^  we  hereby  agree  and  bind  ourselves. 
I^'i'^'l  ^^'-l'^-  (Sign  here) 

In  tlie  pre-ence  of 

l\Vilne-s  -\\:n  here)    

City  or  town 

State 

Kmiihit    1, 
NATIONM     \\\I1     I'M'IR   rOilPANY  ' 

Memorandui..    of    agreement    between...      ■  ■  •     x-'    •' '  '  ■.'«''n 
,,f  .    a-..'led  the  purchasei  I  and  the  National  VVa.l 

I'aper  Company  of  New  \ork.  N.  Y.  (calletl  the  company). 

I    The  purchaser  agrees  to  select   and  order   trom  and  out  ol 
jobbing  lines  of  the  machine  made  g.H,d,  of  the  company  on^or  I'C" 
fore  October  i .  iSof).  wall  pai)er  to  th-  aggregate  .inuiunt  u.  t 
>l)i.  .11    N    V    Fru.sl  Investigation,  1897,  PP  S04  Jiot) 


Factors'  Acrkemf.nts 


i.u 


^^■^"-"h hereby   request   the  company   to   manufacture   lor 

T        7-prior  to  April  I.  iSi)-j,  >^ru„(is  to  he' (leHvered  F.  ().  H.  at 
\e\    \(>rk,  or  at  the  respective  places  of  manufacture. 

The  terms  of  this  sale  are  four  ( \)  months  from  date  of  invoice, 
uuii  a  discount  at  the  rate  of  one  per  cent.  [)er  month  for  anticipated 
payments.  Ciood.s  shipped  between  October  I'thand  March  ist  to 
ilate  from  March  i>t,  and  orders  for^oods  not  shippid  before  March 
I,  i.Sq7,  may  be  cancelled  by  either  party  to  thi>  a^'reement. 

^  The  purchaser  e\i)ress|y  <ruarantee  and  a,t;ree  that  betv/ei'u 
September  i,  iSqO,  and  June  ,^0.  1807,  will  not  purcha.-e  or  ar(|uire 
any  wall  paper  or  hanpinK>  the  i)roduct  of  anv  person  or  corpora- 
tion other  than  the  company,  and  that  will  j^'ive  additional  and  du- 
plicate orders  [)ri()r  to  July  i,  iSg;,  to  the  amount  of  S 

and  in  consideration  of  such  guarantee  and  upon  the  performance 
thereof  company  shall  credit  the  purcha>er  with  the  discounts 
hireniafter  named  on  the  attached  schedule  on  all  purchases  from 
the  jol)binj^  line,-  of  the  machine  made  Roods  of  the  (X)mpanv  be- 
tween said  dates.  1  Such  di-n.unts  shall  be  fij^ured  and  credited 
upon  the  l).i-i>  <if  the  -hiimients  made  hereunder  and  the  discount- 
shall  be  calculated  upon  the  f,ross  prices  publi-hed  bv  the  company 
in  Its  price  ViA  for  the  |)atterns  selected  by  the  pi'irchaser.  The 
I'ircli.iM'r  j,;u.ir,mtee  '  as  a  condition  of  ihe'allowaiice  of  such  dis- 
counts to  refrain  from  making;  such  u>t'  thereof  anions  the  trade  as 
to  interfere  with  the  unifornu'I>  of  the  o/mpanv'^  price  and  terms, 
and  that  (the  purchaser)  will  at  all  time- during  tluV  contract  main- 
tain the  company's  road  prices. 

4.  The  company  agrees  to  extend  the  same  line  of  di-counts  re- 
ferred to  above  to  such  Roods  as  are  cgntained  ii;  the  e\chisi\c 
lines  of  the  machine  made  Roods  of  the  com[)an\  on  the  express 
guarantee  that  such  Roods  will  be  u-ed  only  for  the  retail  de|)art- 
mmt  of  the  punha-er  in  the  city  of  '  ,  and  will  not   be 

offered  at  ulioK-ale  within  hi<  store  or  on  the  road. 

I'his  contract  shall  at  all  times  and  for  e\(  rv  purpose  !)<•  dt cmed 
to  have  been  made  and  executed  at  the  principal  ofTice  of  the  com 
pany,  in  the  city  of  New  York,  and  it  -h  ill  lor  every  jnirpo-e  be 
construid  under  the  laws  of  the  State  of  .New  York,  ' 

Dated,  the  city  o(  N'ew  ^■ork 1890. 


I 


.National  Wall  Paper  Company, 

rrisident. 
'  This  :ienlencc  isi  Ibus  in  oriniiul. — Kd. 


1^2 


IvT^f-jTiji  \i     rnMl.l\  VTTONS    AND     VrUSTS 


•  ..T-T,,^-iv.   ti-cw    f  11  i\T\i'.    CfntPANY' 


\r\v  Yorl 


-,  iSq-. 


Dear  Sir.— \Vf  (.lulo-c  hen  willi  in\oice  of  cvfii  (iatc,  from  whith 
you  arc  "cniitlLd  Ic  our  u>u:il  (k'ductions  of  one  per  cent,  trade  (ii<- 
couiU  on  one  humlred  barrel  lots,  and  one  per  cent,  fo'  cash  if  paid 

within  ^even  day^.  •   ,     r     -.i  ■ 

Should  vou  M)  desire  we  shall  l.e  pleased,  upon  receipt  of  withm 
written  request,  to  constitute  you  one  of  our  .:^hiU>,  in  which  cum- 
suf,'ar  will  he  con-imu'd  to  you  for  sale  as  our  factor,  upon  the 
following  terms,  the  titie  to  remain  in  us  subject  to  your  ad\ances 
and  return  to  vou  of  vour  necessary  outlay: 

1  Vou  are  to  advance  to  us  within  thirty  days  the  amoui-  ul 
till'  invoice,  whi(  h  will  be  made'  up  at  our  daily  ciuotatimis,  less  one 
per  cent,  trade  di-^count  on  one  hundred  barrel  lots,  with  the  n,t;ht 
to  deduct  one  \nT  cent,  additional  if  invoice  is  made  cash  in  s.vn 
days;  the  ailvance  to  be  without  recourse  to,  or  reclamation  upon 
us,  and  to  be  due  in  anv  event. 

2  The  ^uj^ar  when  -old  is  to  be  billed  in  your  name,  althou^li  in 
fact  as  factor  for  u-,  .uul  vou  -hall  without  reclamation  uj.on  u-. 
at  your  own  co^t,  ])av  all  e.vpenr-es  and  a>>ume  all  riks  ol  the  prop- 
erty and  of  payment  or  collection.  Vou  are  not  to  incur  any  ( ■ - 
pense  on  our  account. 

V  None  of  the  >u-ar  shall  be  sold  or  disposed  ol  by  you.eith.r 
directly  or  indiiectlv,  for  less  than  our  daily  ([uotations,  with  freight 

added 'itomrehninj;'p"'"^*'M"''"^"f^=^'^"''^I'''''^''!^''''''>''''"'^^ '"'"'''' 
nor  on  more  liberal  terms  as  to  credit  or  cash  discounts. 

So  lonj^  as  the  fore>?oinK  conditions  are  observed  by  you  we  will. 
upon  an  airidavit  to  th.it  effect,  pay  you  a  commi^^ion  of  three- 
sixteenths  of  a  cent  per  pound,  and  in  ad.lition  thereto  you  sh.i  1 
retain  the  profit,  if  any,  over  the  advance  made  as  alune  provided. 
In  case  of  any  failure  to  comply  with  either  of  the  above  conditions 
no  commissii^s  will  be  i)avable.  Settlements  will  l)e  made  for  each 
month's  commissions  at  the  exiiiration  ol  three  months  thereafter. 
Alt  commissions  pavable  for  the  i)eriod  preceding  the  three  niotittis 
will  then  become  due.     Payments  will  only  be  made  as  above. 

•Op.  cit.  N   V.  trust  InvesliKation,  idg;,  pp.  1^8-130. 


Factors'  Agk eemexts 


133 


Th^s  aG;ency  I;,  terminable  at  the  pleasure  of  either  party,  on 
written  notice. 

Yours  re-[ie(tfully, 

THE   AMEKIC.W    SUGAR   REFINING   COMPANY. 


I 


State  of ss. 

C'nunty  of 

beiiiK  duly  sworn,  says:  I,  as  factor  of  the  American 

Sufiar  Retinin;^  Comi)any,  claim  fmni  the  C()mj)any  a  com- 
niis>ion  of  three-sixteenth'    of  a  ci  iit    per    pound    (le>s    one    per 

cent,    where    trade    discor.nt    has    been    allowid),    ujKjn 

[)()unds  of  sugar  consi<i;ned  by  the  company  to  me  by  invoices,  the 

dates  of  which  cover  the  jieriod  from to inclusive.     In 

compliance  with  the  condition.,  upon  which  the  suirar  was  consigned 
to  me,  and  to  entitle  myself  to  the  co:iHiii-.-ion.  I  do  hereby  make 
alTidavit  that  none  of  the  sugar  mentioned  in  the  said  invoices  lias 
been  or  will  be  sold  or  (lisi)osed  of  by  me,  either  directly  or  indi- 
rectly, for  less  than  the  daily  quotations  of  the  com[)any,  with 
Inight  added  from  ntining  jioint  to  point  of  sale,  as  i)er  Equalitv 
R  ite  Hook,  nor  on  more  liberal  terms  as  to  credit  or  cash  discounts. 

"^worn   to   before   nie 

thi-->  day  of ,  in  the  year  of  189     . 

ExiinuT  5 

UNITED    STATi.S    Kri',i;i  R    COMPANV  » 
MlMilKAMU'M    lU'    A(,K1IMEM 

Between  the  liiited  States  T\ul»ber  C'()mj)any,  selling  agent,  here- 
inafter   calk-d    The    Comi)any,    and of 

hereinafter  called  Tlie  TurchaMT.  wlienby  rubber  boots  and  shoes 
(excej)t  tennis,  whidi  arc  not  iruludcd  in  this  agreement)  .sold  by 

The  Company  are  purchased  by  the  >aid sul)ject  to  tlt'e 

following  terms,  discounts  and  conditions: 

(Jross  Price  List  Season  1896-1807,  Eniling  Mar(h  ^i,  1S07, 
lir-t  Discounts.  First  Quality  Hrands:  American,  IJoston-R.  II. 
(\indee,  Lycoming,  Meyer,  \ew  Hruiiswick,  riuted  States  Kubbi  r 
Company,  VValcs-Goodyear  and  Woonsocket.  at  15  and  8  per  cent, 
ili'count  from  above  stipulated  gross  price  li>t. 

riius  in  original.— Ed. 
'O;).  lit.  N.  Y.  Truiit  Investigation,  iSoy.  pp.  ()46-«5a. 


134  Industrial  CoMmNAiioNs  and  Trusts 

Second  Qualilv  lira.uls:  Para.  Xq.tun.,  Federal  Keystone, 
E^sex,  Jersey,  Cunneclicul  and  Rhode  I.lan.l,  15.  12  and  S  per  cent, 
discount  from  above  stipulated  Rross  price  li^t. 

Third  Oualitv  Brand:  Columbia,  15,  i--  i-  ^^nd  b  per  cent,  dis- 
count from  above  stipulated  pros,  price  li>t 

Cash  discount  of  S  per  cent,  i.er  annum  to  be  allowed  for  pre- 
payment. Interest,  0  per  cent,  i-er  annum,  will  be  barged  on 
;,y;.rdue  accounts.  It  beinR  understood  that  the  agreement  by  the 
company  to  deliver  under  this  contract  i>  limited  to  the  following 

brand^: 

First  (Uiality 

Second  (Juality 

Third  nuality 

Second— Terms.-Deliveries  of  all  good>  made  hereunder  t.. 
Nnv.mber  i  will  be  i>ayable  December  15.,  1S96.  delivenes  in  No- 
vember payable  January  15.  1^07 ;  deliveries  in  December  payable 
February  15,  1S07;  <leliveries  in  January  payable  March  i.>.  j^Q". 
.K.liverics  in  February  payable  April  15,  iS.,7;  cl-l'^'-ies  in  March 
payable  Mav  i^.  iS(,7.  The  company  shall  have  the  right  to  call 
,  ,r'  an<l  purchaser  agrees  to  give  upon  such  call,  cash  or  notes  accept- 
able to  the  comi^any  for  the  net  value  of  the  go.nls  .lelivered  under 
thi^  contract  before  the  accounts  therefor  are  due. 

rhird  —The  purchaser  agrees  to  be  governed  in  his  selling  price 
ami  terms  by  the  instructions  of  the  company,  and  hereby  promises 
;,.,  to  depart  fn.m  or  eva.le,  by  any  direct  or  indirect  me  ns.  al 
,!k-  conditions  set  forth  in  Section  Fourth,  Se  ling    'rice.    It  is  al>« 
understo..d  und  agreed  that  these  conditicms  for  sale  ol  these  goods 
bv  purchaser,  apj.lv  to  all  on  hand  .\pril  i.  1S06,  as  well  as  to  present 
,.r  future  purcha-t's  under  this  contract.      The  o_.mpany,  on    its 
nirl   a-rees  that  if  anv  change  is  made  in  the  sellingprice  imme- 
diate notice  shall  be  given.    And  the  said  purchaser,  in  case  of  In- 
failure  at  any  time  to  faithfully  observe  all  the  terms  and  condition. 
o(  this  contract,  or  any  contract  made  with  the  company,  hereby 
consents  to  the  cancelling  by  the  company  <^f  all  its  unl.lled  orders 
then  in  the  hands  of  the  company,  and  in  case- of  such  default  on 
the  part  of  said  i.urchas.r  the  company  aUo  hereby  reserves  the 
right  to  cancel  all  said  purchaser's  orders  then  untilled,  and  in  caic 


Factors"  Agreements 


<■:>:> 


of  such  cancellation  the  accounts  of  said  purchaser  with  the  com- 
pany sha''  thcreui)on  become  immediately  due  and  payable. 

Fourth — Sellinj;  Price. — Until  further  notice  the'i)rices  and 
terms  fixed  by  the  company  for  the  sale  by  the  said  purchaser  of 
the  within  named  goods  (except  to  jobbers  as  per  Article  Seventiu 
are  as  follows: 

Discounts.— First  (Quality  Brands,  15  jier  cent.;  Second  Qualil\- 
Brands,  15  and  12  per  cent.;  and  Third  Ouality,  15,  12  and  12  per 
cent.  from  gross  price  list  of  1806-1807. 

Terms. —  Bills  for  delivery  between  .April  1  and  October  ;;i, 
iSq6,  both  inclusive,  shall  be  dated  not  later  than  November  i, 
nit  thirty  days,  i  per  cent  off  for  cash  in  ten  davs. 

If  paid  prior  to  November  10,  S  per  cent  per  annum  to  Novem- 
ber 10,  and  the  above  mentioned   i   per  cent,  may  be  allowed. 

If  paid  between  November  10  and  December  i,  S  j)er  cent,  per 
annum  only  may  be  allowed. 

Bills  for  deliveries  between  November  i,  i8q6,  and  March  31, 
iS,)7,  both  inclu-ive,  shall  be  payable,  net,  thirty  (Jays  from  date 
of  shipment,  or  i  per  cent  otT  for  cash  in  ten  davs. 

Freight. — .Xetual  freight  may  be  allowed  by  said  purchaser  from 
any  point  to  any  other  point  of  railroad  or  steamboat  delivery  at 
hi-  own  cost  and  expense. 

Filth — Liability  as  to  Orders. — The  company  will  nc't  be  obli- 
g.itcil  to  deliver  more  goods  than  contracted  for  in  tliis  agreement, 
iii't withstanding  it  may  have  received  and  acknowledged  orders 
which  exceed  amount  of  cases  contracted  for  in  this  agreement. 
It  is  also  mutually  agreed,  in  case  of  labor  strikes,  lire  or  other 
iM-ualty  that  may  curtail  or  stop  the  production  of  go(.)ds  con- 
tr.uted  I'or,  that  the  company  shall  not  be  IieM  respon>ible  for  non- 
luliillnient  of  orders  beyond  the  capacity  to  produce,  having  refer- 
ence to  the  whole  business,  and,  on  the  other  han<l.  should  fire  or 
other  casualty  overtake  the  business  of  said  [)urchaser,  then  tlie 
Company  will  cancel  his  orders,  if  he  so  desires.  In  contracting  for 
certain  number  of  cases  the  company  does  not  obligate  itself  to 
supply  all  in  the  particular  style  of  boots  and  shoes  which  the  orders 
detailed  may  call  for,  but  only  such  quantities  of  the  partic.I  ir 
styles  embraced  in  the  order'-  detailed  as  the  company  can  sU[)ply, 
having  reference  to  the  capai  ily  to  produce  and  il>  obligation  to 
all  of  its  customers.  Two  weeks'  notice  of  any  changes  by  the 
purchaser  in  detailed  orders  is  required  to  cover  guuda  in  process 
01  manufacture. 


136 


Industrial  C"<)MD1\ations  and  Trlsts 


Sixth— Guarantcc.-In  consideration  of  the  faithful  perform- 
ance of  this  contract  on  the  part  of  the  j.urcha.er,  the  conn'ar.y 
hereby  guarantees  that  in  case  it  shall,  l-rinr  to  December  ist,  nex  , 
reduce  the  selling  price  to  retailers  below  the  price  herem  namec 
a  corresponding  re<lucti..n  shall  be  made  to  said  purchaseron  all 
Roods  shipped  or  delivered  to  him  prior  lo  that  date.  But  in  case 
any  reducti..n  is  made  in  the  i.rice  to  retailers  between  December 
ist  1806,  and  March  ,^i>t.  1S07,  both  inclusive,  then  the  said  pur- 
chaser shall  be  entitled  to  a  corresponding  reduction  only  on 
Roods  actually  on  hand  in  h.i>  own  store  at  the  time  of  such 
reduction,  a  statement  of  -hi.h  he  -hall  u.nudi.  under  oath,  .1 
desired  It  being  understood  that  this  guarantee  shall  not  be 
aflected  bv  the  sale  of  out-of--tv!e,  d.amaged  or  imperfect  goods, 
and  that  'the  company  re.erv.s  to  il-ell  entire  freedo.n  as  to 
the  clas^ilication  of  dealer,  to  whom  it  may  sell  Us  goods  direct  as 

^""siventh^i: xrhange  of  Goods.-Xothing  in  this  agreement  shall 
nrevent  cu>tomers  of  the  said  company  from  exchanging  with  each 
other  or  purchasing  from  each  other,  at  prices  mutually  agreed 
upon  and  with  written  approval  of  the  saic  company,  its  goods 
nav  be  exchanged  with,  or  sold  to  othrr  jobber.,  provided  such 
"ods  height,  ..Id  or  exchanged,  shall  not  be  reso  1  at  any 
better   discounts    or    terms    than    are    stipulated    in    thi.  agree- 

""I'-^Hth  —Damaged  or  out-of-style  goods  whii  h  cannot  be  sold 
at  full  disc.nmts,  mav  be  di<i«.sed  of  at  re<luced  prices,  with  the 
consent  of  the  companv.  upon  sending  to  the  company  a  list  u, 
such  unsalable  good..  To  avoid  any  c.rntusion  with  di^ounts  on 
standard  styles,  all  damage.l  and  out-ot-style  goods  mus  be  s.,M 
at  net  prices.  The  company  may  ^ell  damaged  or  out-of-style 
goods  at  reduced  net  ]irices. 

^\-l,,,h-Orders.-It  i>  un.lerstood  and  agree.l  tliat  all  the  fore- 
fToing  conditions  are  to  apply  to  all  goods  purchased  by  the  saui 
of  the  comiKinv,  for  the  season  ending  March  .^ist,  i>9/, 
cxcenliii"  that  the  discounts  named  in  Section  i  apply  on  y  to 
"cases,  the  detailed  order  of  which  the  s.ud  purchaser 
pn'.m'iies  to  give  immediately  upon  rer|ue.t.  In  case  the  said  pur- 
chaser 4iall  fail  to  send  in  detailed  orders  t(^r  the  go.Mb  her.  1.1  con- 
tracte.l  l-.r.  witliin  lift.en  days  after  receii.t  of  such  rniue-t.  in 
writing,  tlien  the  company  shall  be  released  from  the  dehvcry  ot 
anv  and  all  goods  not  so  ordered  in  detail. 


*-w 


Factors'  Agreements 


KS7 


All  order?  unfilled  March  .yst,  iSgy,  will  be  understood  as  can- 
cillid  at  that  date.  The  company  c;'.nnot  undertake  to  mark  or 
>hi])  goods  to  the  purchaser's  customers. 

Tenth — X.  B.— It  is  hereby  understood  and  agrcecl  to  that  this 
L'.iUract  is  absolutely  between  the  M'ller  and  the  purchaser,  and 
annuls,  cancels  and  obliterates  any  and  all  contracts,  afi;reements, 
understandings  or  practices  heretofore  in  vcj^ue,  under  which  the 
purchaser  has  heretofore  bought  jtoikIs  ui  the  Ijrands  herein  con- 
tracted for,  and  it  is  distinctly  understood  that  no  other  contract, 
UL'reement,  understanding  or  jirevious  practice  prevails  in  resjiect 
to  the  subject  matter  of  this  contract,  except  those  herein  specif- 
iiallv  ])rovided. 

Dated  at this  first  day  of  Ai)ril,  1S96. 


(This  contract  is  not  binding  until 
approved  by  Director  of  Sales.) 
.\[)proved: 

Director  of  Sales. 


SrrPI.FMKNTARY   .\GRF.F.Mt'.NT. 

The  United  States  Rutjber  Company,  selling  agent,  hereinafter 
'*        called  The  Company,  in  consideration  of  a  certain  agreement  be- 
tween  it    and    ,  hereinafter  called  The    i'uri.  baser, 

dated   at .Al'ril    i^t,    iSqO,    hereby   covenants   and 

agrees  with  said  purciiaser,  that  if  said  i)urchaser  shall  have  well 
aiid  failhfuUv  kept  and  performed  all  the  undertakings  on  his 
jiart,  to  be  performed  in  said  agreement  cnnlaiiu'd,  and  shall  not 
have  directly  or  indirictly  violated  the  ^-anie  or  any  ])r()visi.in 
thereof  while  it  continues  in  force.  The  Company  will,  as  soon  after 
the  first  dav  of  April,  iSqj.  as  The  Company  is  satisfied  that  said 
agreement  has  been  faithfully  kept  and  performed  by  said  Pur- 
chaser, and  account  settled  iii  full,  i)ay  or  credit  him  with  7  per 
(int.  on  the  net  amount  of  hi^  purrhase^^  under  said  agreement. 
Fhis  7  per  cent,  shall  form  no  part  of  settlement  between  The 
t  ompany  and  said  PurchaMT,  but  it  is  to  be  rega-ded  purely  in  the 
lii'ht  of  a  rebate,  and  payable  only  subject  to  the  c  >nditiuns  herein 
stated. 


"'f 


138 


Industrial  Combinations  and  Trusts 


Provided,  however,  that  if,  in  the  opinion  of  the  Company, 
which  is  to  be  final  and  conclusive,  said  agreement  shall  have  been 
in  any  material  respect  violated  by  said  [)urchaser,  he  shall  not  be 
entitled  to  said  rel)ate  of  7  per  c»nt.,  but  sliall  pay  for  all  goods 
pu-chased  by  him  under  said  agreement,  upon  the  terms  and  at 
the  discounts  therein  mentioned,  without  further  discount  or  re- 
It  is  mutually  understood  that  any  freight  or  cash  discount 
made  by  said  Purchaser,  other  than  as  stipulated  in  said  agreement, 
shall  bo  deemed  a  violation  of  its  terms  as  completely  and  to  the 
same  extent  as  a  concession  in  terms  or  discount. 

An'  it  is  also  nutually  ^  understood  that  said  Purchaser  is  to 
be  ht  responsible  for  any  violation  of  said  agreement  by  his  em- 
ployes. 

Dated ,  this  first  day  of  April,  1896. 


(This  contract  is  not  binding  until 
approved  by  Dia'Ctor  of  Sales.) 
Approved : 

Director  of  Sales. 


ExHIBIi    b 
STANDARD   SANITARY    MANUFACTURING   COMPANY  » 

>g„Tr.— This  contract  must  be  executed  ])y  the  Purchaser  in 
order  to  purchase  Licenced  Sanitary  Enameled  iron  Ware. 

JOBRF.RS  LICKNSK  AGREEMENT 

Tins  Ar.REKMKNT.  Made  this day  of 

iQO     ,  between  the a    corporation 

(hereinafter  called  the  Company)  and 


.  (hereinafter     called     the 


State     of 

Purchaser). 

'  Thus  in  oritiiiial. — Ed.  ,         .      ^  j 

2  Lnilrd  SUiUs  of  Aimrir.i  v.  SLimlard  Sanilary  Manufacturing  Company  and 

others.    In  thu  Circuit  Court  of  the  Initcil  Sl.iU-s  (or  the  District  of  Marylarnl. 

I'ct.  E\hiMl  .\o.  u,  Record,  Vol.  11,  [ip-  i-!-J9- 


»■-  Bf  ■ 


Factors'  Agreements 


139 


WITNESSETH:  Whereas  the  Company  is  licensed  under  certain 
United  States  Letters  Patent  relating  to  Sanitary  Enameled  Ware 
;ir.(l  processes  and  apparatus  used  in  the  manufacture  thereof, 
which  said  Letters  Patent  are  enumerated  as  follows: 


SCHEDULE   OF    PATENTS 


Pat.  No.  Date 

6^3,941  Sept.  26th,  iSqq 

949,625   Feb.  15th,  1910 
g39,9i8   Nov.  9th,  1909 


Inventor 
James  Arrott 


Title 


Dredger  fur  Pulveru- 
lent Material. 
E.  Ditheridge         Pneumatic  Sieve. 
William  Lindsay    Enameling    Powder 
Distributor. 


.\nd  Whereas,  the  Purchaser  desires  to  purchase  from  the  Com- 
pany Sanitary  Enameled  Iron  Ware  embodying  or  made  in  ac- 
edrdance  with  said  inventions,  and  to  obtain  licenses  to  sell  such 
ware  to  others,  and  the  Company  is  willing  to  sell  Sanitary  Enam- 
iK'd  Iron  Ware  to  the  Purchaser,  and  to  license  it  for  resale  on  the 
fallowing  terms  and  conditions: 

Now.  Therefore: 

I.  The  Company  agrees  to  sell  and  the  Purchaser  agrees  to  buy 
iDr  a  period  of  time  beginning  June  ist,  1910,  and  ending  December 
31st,  1910, Sanitary  Enameled  Iron  Ware  at  the  follow- 
in'.:  discounts  from  the  prices  given  in  the  various  Schedules: 

(Insert  label) 


DISCOUNTS  AND  TERMS 

Articles 

Discount!;  irom  Rpsa'e  Prices 
Esialilishc'l  by  thu  Licensor 
(To   be   allowed    on   invoices 
by  the  Manufacturer) 

Schedule  No.  1-5  year  Guaranteed  Baths,  Foot,  Pool,  Sitz 

and  Child's  and  Receptors 7^3-2% 

Schedule  No.  2-2  year  Guaranteed  Baths 5% 

Srhedule  No.  3-AII  other  Grades  of  Baths     5% 

•Schedule  No.  4-Smail  Wares,  Drinking  Fountains,  Lava- 
tories, etc .  .      7-3^% 

Exceptions:  Lavatories,  similar  to  Plates 
(Standard)  P-558,  559,  561  and  562 5% 


I40 


iNUUMRUL  Combinations  and  Trusts 


Di'^countr;  from  Resale  Tnces 

F^taMi^hcl  liy  the  LicenMir. 
Cl'd    he    ullowe.l    en    iuvuices 
by  tlie  Maiiuiatturcr) 

Schedule  No.  4-^  ^T^oU  Rim  Siriks  and  CombinaUon^^ 
Slop  Sinks,  Sink  Back,  and  hnds,  Drain 
Boards,  Factory  and  Wash  Sinks,  Sink  and 
Tray  Conit)inat'i(>ns,  Laundry  Trays, Closet 

Bowls  and  I'rinal. 5/o 

Schedule  No.  5-l'lat  Kim  Sinks  and  Coml)inations,  Sfiuarc 
and  Round  Corner  Kitchen,  Half  Circle, 
Corner,  Slop  Sinks,  Slop  Hojipers,  Wash 
Bowls,  Traj)  Standards  and  (irease  Traps  5/0 
Schedule  No.  6-Tanks,  Clo>et  and  Urinal.  High  and  Low     ^^ 

Pattern S/o 

Terms:  Net  00  days  „r  :'';    for  cash  loth  of  mcuith  followin,-.' 

^^"!'"^^-"'-  Dl-.l.lVKRIKS 

.  Good:-,  will  he  ^old  to  th..  Purchaser,  F.  O  B.  Cars  where 
factory  is  located,  at  the  price-  given  in  the  Resale  Sheets  or  the 
various  zones  (subject  <o  the  Discounts  and  Rebates  named)  with 
full  irei-ht  allowed  on  shipments  of  200  poun.ls  an.  oyer  (subjec 
to  the  Freight  TarilT  Regulations  herein  ])rovuled  for)  to  the  list 
of  cities  named  in  the  various  /.ones.  To  other  p..mts  than  those 
named  delivery  can  be  mrtde  only  on  the  basis  of  the  Purchaser 
l)ein"  charged  and  paving  freight  from  the  nearest  city  named, 
based  on  the  weights  shown  in  the  sheets  and  it  Ine  rates  shown 
in  the  F(iualizing  TarilT  Schedule.       _  ,,.-,•, 

XoTi  •  Good,  may  be  shipped  in  mixed  car  loads  to  ah  points, 
on'  or  east  of  the  western  bank  of  the  Missi.sippi  River,  Minneap- 
olis to  New  Orleans  and  to  -'h-  Allanti.  ^^aboard,  inclusive.  1.^ 
points  west  of  the  western  bank  of  the  Mississippi  R.v-r  goods 
may  onlv  be  sliipped  in  mixcl  car  loads  to  points  so  provided  lor 
in  the  Railroad  TanlYs  and  Classifications.         _  ,  ,.  1     ,        1 

Goods  '-hall  be  VM.ld  bv  the  Purchaser  at  prices  establisned  ai  d 
jirevailing  in  the  variou.'zone.  into  which  the  goods  are  shipiici 
rcardless  of  the  jioiiit  of  purchase. 

Purchaser  will  i'c  allowed  car  load  prices  m  any  quantity  o:i 
shipment-  to  the  manufacturing  and  jobbing  points  specilied.    (- 
shipments  to  joV)bing  points  other  than  manufacturing  points,  c 
ioad  or  less  car  load  prices  will  apply  according  to  f|uantity. 


FACT()k^'    Ac.RELMKNTS 


141 


gkni;kai.  Ki\nrru)\5 

!,.  Prices  or  other  re^jjulalions  are  effective  the  morning  of  the 
(Kite  apiieariii^  oil  the  sluit. 

4.  Tile  ware  covered  Ijy  the  Price  Sheets  shall  he  iiivoiced  by 
the  individual  items,  and  it  is  not  permissible  to  bill  collectively 
several  articles  in  a  "Lump  Sum."' 

5.  The  \'arious  conditions  respecting;  "Guarantees"  under  v.hich 
llie  ware  is  purchased  by  tlie  jobber,  shall  not  be  varied  in  the  re- 
sale to  the  plumber. 

(1.  The  restrictions  herein  contained  as  to  the  prices  at  which 
Sanitarv  Knameled  Iron  Ware  is  to  be  purchased  and  sold,  shall 
nut  applv  'o  Sanitary  Knameled  Iron  Ware  sold  and  exported  to 
lorei^n  Countries.  Such  sales  must  be  proved  bona  fide  ')  the 
Licensor. 


REBATES 

7.  If  all  the  conditions  of  this  aiireemcnt  have  been  complied 
with  and  you  have  conl'ined  your  jjurchases  to  the  Licensed  Manu- 
facturers, we  will  pay  you  rebates  on  such  purchases  as  you  have 
made  from  us  as  follows: 

Schedule  Xo.  1-5  year  Guaranteed  Baths,  Foot.  Pool,  Sitz 

and  Child  >  and  Rireptors 5^,^ 

Schedule  \o.  2  -2  vear  Guaranteed  Haths 5% 

Schedule  No.  2,  -Al'l  othtr  tirades  of  Laths $% 

Schedule  Xo.  4- Small  Wares,  Drinkinj;  Fountains,  Lava- 
tories, etc .-        ■. 5% 

Fxceptions:  Lavatories,  similar  to  Plates 
(Standard)  P  55S,  550.  561  and  562 5% 

Schedule  Xo.  4-^"  Roll  Rim  Sinks  and  Combinations,  Slop 
Sinks,  Sink  Hacks  and  i'.nds.  Drain  Hoards, 
Factory  and  Wa>h  Sinks,  Sink  and  Tray 
Combinations,  Laundry  Trays,  Closet 
Howls  and  Urinals     5% 

Schedule  No.  ^-Flat  Rim  Sinks  and  Combinations,  Square 
anti  Round  Cornered,  Kitchen,  Half  Circle, 
Corner,  Slop  Sinks,  Slop  flopjicrs,  Wa<h 
liowls,  Trap  Standards  and  Grease  T'raps.   5% 

Schedule  No.  6-Tanks,  Closet  and  Crinal,  High  and  Low 

Patlorr 5% 


-if\ 


142  Industrial  Combinations  and  Trusts 

8.  If  your  purchases  of  matciiol,  less  returned  goods,  covered 
by  the  various  Schedules  from  the  following  Manufacturers  li- 
censed under  the  patents  enumerated  hereinbefore: 

Barnes  Manufacturing  Co.,  The Mansfield,  O. 

Cahill  Iron  Works,  The Chattanooga,  Tenn. 

Cohvell  Lead  C(j ^'t\v  York. 

Day-Ward  Co.,  The Warren.  O. 

llu'niphieys  Mlg.  Co.,  The Mansiield,  O. 

Kerner  Manufacturing  Co Pittslnirg,  Pa. 

Mott  Iron  Works,  I'he  J.  L New  York  City 

McVay  &  Walker Braddock,  I'a. 

McCrum-Howeli  Co..  The New  York  City 

National  Sanitary  Mfg.  Co.,  The Salem,  O. 

Standard  Sanitary  Mlg.  Co Pittsljurgh,   Pa. 

Union  Sanitary  Mfg.  Co Xohlesville,  Ind. 

United  States  Sanitary  Mfg.  Co Pittsburgh.  Pa 

Wolff  Mlg.  l  o.,  L Chicago.  111. 

Weiskiltel  &  Son  C"o..  .\ Baltimore,  Md. 

Wheeling  Knamei.d  Iron  Co W  heeling,  W.  Va. 

have  aggregated  sums  as  follmv;.  and  if  all  the  conditions  of  thi> 
agreement  have  been  complied  with,  the  Company  wiU  pay  the 
Purchaser  rebates  on  such  pure;  .ise>  a^  they  have  made  from  the 
Company  during  the  period  ending  December  ;,ist,  1910,  as  fol- 
lows, 

Sio.ooo '-'l!% 

$15.000 .5       ''0 

$20,000 3-'-'% 

$2^.000 4       % 

$^0,000 5       % 

Rebates  are  payable  only  at  the  i-xpiration  of  the  perio '  cndimr 
December  ,^jst,   1010,  and  after  claims  have  been  approv.-d  ii 
K.  L.  Wayman,  I.icef.Mir,  .\rrott  Building,  Pitls))urgh,  I'a. 

Written  application  fur  nhate  must  be  made  at  '.he  close  of  the 
rebate  j>eriod  to  K.  I..  Wayman,  Licensor,  upon  ^tandaril  forms, 
\\hi(h  may  l)e  obtained  from  him  kn  th.it  jjurpose.  I'nless  claiin 
l.)r  rch.ilr  i.  jiresei-ttd  within  ,^0  days  after  the  expiration  of  this 
agreemint,  the  right  to  refuse  to  allow  such  rebate  is  reserved  l>y 
the  Licensor  named  above. 

'  at  the  expiration  ot  this  contract,  a  similar  contract  is  made 
h(-tween  the  purtie>  liiri  lo  .md  the  jmrihases  under  each  contr.ut 


Factors'  Agreements 


143 


arc  sufficiently  large  so  that  the  aggregate  of  the  purchases  under 
hdth  contracts  arc  double  the  amounts  named  above,  then  the 
("oinpaany  '  will  pay  thi;  percentage  rebate  named  above  on  the 
entire  amount  of  such  purchases  under  both  contracts,  but  it  shall 
not  be  permissible  to  aggregate  jmrchascs  made  under  more  than 
two  successive  contracts  to  olitain  any  greater  rebate  than  may  be 
payal)le  under  the  last  of  such  two  successive  contracts. 

().  The  Purchaser  understands  that  the  re-sale  prices  of  all  ware 
manufactured  under  the  Letters  Patent  enumerated  herein,  as 
e-tal)lished  from  lime  to  time  \>y  the  Company,  must  l)e  maintained 
liy  all  Licensed  Sanitary  Knanuled  Iron  Ware  Manufacturers  and 
liy  ail  Jobbers  and  Dealers  and  that  sales  by  one  Jobber  to  another 
cannot  be  made  at  any  better  prices  than  established  in  the  sheets. 
ri'.c  Purchaser  therefore  agrees  that  he  will  observe  and  strictly 
maintain  on  all  tyjies  and  classes  of  ware  the  selling  prices  as  thi'y 
are  set  forth  in  the  schedules,  and  will  observe  and  strictly  adhere 
to  the  rules  and  regulations  as  embodied  in  the  Price  Sheets  and 
furnished  as  a  jiart  of  this  agreement,  or  as  they  may  be  embodied 
ill  the  Price  Sheets  issued  hereafter  and  substituted  by  or  under  the 
authority  of  the  Licensor  (K.  L.  Wayr^an)  in  place  of  those  fur- 
i-hed  herewith.  Articles  may  be  adi  1  to  or  removed  from  the 
^  lu'dules  at  any  time;  but  in  the  event  of  such  removal,  the  pur- 
chase's to  ('  'e  of  such  removal  will  be  considered  as  part  of  the 
amount  on  which  rebate  is  estiniateii. 

10  The  Purchaser  also  agrees  during  the  life  ot  this  company 
nut  to  purchase,  sill,  advertise,  soluil  orders  for,  or  in  any  ^wiy 
li  iiulle  or  deal  in  Sanitary  Knameled  Iron  Ware  of  any  manufac- 
Mi(T  not  licensed  under  the  Letters  Patint  enumerated  herein, 
r\(  t  pt  with  the  express  written  permission  of  the  Lict  nsor.  Breach 
0!  any  of  the  pr()\isionsof  this  agreenu'nt,  or  any  failure  to  maintain 
.;.  1  observe  prices,  rules  or  regulations  shall  give  the  Company, 
'  r  1..  L.  Wiyman,  owner  of  the  Patents  In  reini)eforf  enume'afed, 
. 'i  "]iti(in  immediately  to  cancel  this  contrait,  all  unlilled  orders 
and  to  withhold  all  rebates;  and  the  Purdia-er  is  hereby  e\|)r(  -ly 
put  on  notice  that  in  ca^^e  of  any  such  failure,  he  can  not  tlure- 
al'ter  obtain  Sanitary  Knameled  Iron  Ware  maimtai  tund  under 
the  Letters  Patent  above  enumerated  jm  any  of  tht'  l.iiensed 
-Manufaclurers. 

n.  As  ;in  ailoed  consideration  for  '.his  agreement  whereby  the 
Purchaser  is  to  be  sold  Koods  manufactured  under  the  patents 
'  Thus  in  origiiul.— Ed. 


Sr 


144  INDISTRIAL    CoMBINATTOXS   AND   TlU'STS 

bcTcinbclore  named,  iho  Purcha^cT  hcTtl)v  agrees  that  as  to  all 
goods,  wares  and  merchan.li^^^  uimh  are  :^nulactured  under  and 
in  accordance  with  the  patents  hereinl)efore  namec  ,  the  I  urchaser 
will  onlv  resell  such  goods  n.AV  on  hand,  or  already  purchased  by 
him  irropective  of  hv  whom  ^uch  goods  have  been  nunufar- 
turcd  in  acror<lance  with  tlu'  rules,  t.rms.  cond.ti..ns,  prices  and 
re-mlations  of  sale  ^vhic■n  are  h.rein  e>.  d.li.hed,  or  which  may 
hereafter  he  established  in  accordance  with  the  term,  ol  this  agree- 
ment  as  ^peci-dlv  set  forth  in  paragraph  o  hereof. 

,,'-rhi.  p'reement  dor^  n-i  become  bindin-  on  the  Company 
untlYacceptrd  in  writing  at  the  foot  h.-reof  b>  the  Sales  Manager  .r 
his  duly  authorized  representative  located  m  the  mum  sales  olhcc 
of  the  Company. 


Accepted  thi> 
day  of. 


19. 


.  (P  irchascr) 


.(Company) 


This 'Statement  muM  be  signed  by  both  N!anufactimT  and 
Jobber,  detached  and  hied  promi)tly  uilh  l-  L. 
Wayman,  .\rrott  Building,  I'iltsburg,  Fa. 

Dated lyi 

E.  1-  WwMAN'.  I.irrnsor, 
Arrott  Building. 

Pittsburg.  Pa.  ^  •■  „      1 

This  is  to  ciTiify  that  a  "  Jobber's  License  Agreement     I  un  ha>e 
Contract  ha>  b.en  (  \ecuted  between 

(Manufacturer) 

and (Jobber) 

(City  and  State) 

at   \ho  following  Discounts  fcubject   to  the  f"^tablished  rebaUJ 
from  the  Resale  Pn.  esestablishe.l  by  you  or  that  may  be  cstabhshed 
bv  vou  durmg  the  peri.-d  ending  Hetember  u^t    i<;io. 
'   "  (Hire  follows  schedule  i)f  articles) 


factors"  Agreements 


145 


ri 


I 


I 
1 


Exhibit  7 

fa'cerpts  snowint.  the  operation  ok  the  factors'  agreement 
of  the  american  tobacco  company  ' 

LIST  or  CnXSIGNT.KS  WHOSK  Ar.RKFMF.NTS  WTKI'.  RKVOKED 
lOR  H AN'DI.IXi.  Ol'I'OSmoX  (.OODS,  AS  SHOWN  liV  TilLIK  OWN 
TESTIMONY  AND  THAT  OF  MR.  liROWN. 

Revoked  bcfort.'  March  i.  1895. 

Su-^>mai!  Brothers,  New  York  city,  December  :i,  iSq;,,  cause, 
pushing  Admiral  cigarettes, — "A  general  inimical  feeling  to  the 
company  and  abuse  of  me." — Browne,  p.  1370. 

John  R.  Miller  &  Son,  Newark,  N.  J.  February  4,  iS(j^.  I'nder- 
stiHui  tn  have  been  given  the  sole  agency  for  the  National  Cigarette 
and  Tobacco  Company's  goods  in  Newark  and  vicinity.  Browne, 
]).  1 551;  Dunstatter,  pp.  11 25-11 26;  total  2. 

FOR  n.\NDLIXG  .\DMIR.\L  CIGARETTES  AFTER  M.VRCH 

I,   iSq5. 

Monroe  Cigar  Co.,  Rochester,  N.  Y.,  May  3,  i8o,3-  They  were 
pushing  the  .Vdmirals  and  .seemed  to  be  closely  in  touch  with  the 
National  Company.  Their  account  was  also  in  a  very  unsati:fac- 
ti.ry  ciTidition.  Browne,  p.  i  v=i'  They  had  the  sole  agency  for 
I  ill'  .\dmiral  Cigarettes  in  Rochester  and  thirty  miles  around. 
T  ike,  27.). 

Ii'hn  Mil.aughlin,  Lancast(T,  ]'a..  May  23,  iSq^^.  \Va>  cut  otT 
fur  "active  pushing  of  the  .\tlmiral  Cigarette  and  the  accompany- 
ing aihcrtisenient  discriminating  against  our  gomN  "  "\\'as 
giving  them  the  preference  over  ours."     Browne,  p.  1  •;54- 

Alexander  \Vil>on  &  Co.,  Pittsburg,  Pa..  May  26,  iS(k.  riny 
'were  the  mo>t  active  distributors  of  .\dmiral>  that  they  (Na- 
tionaH  had  in  Pitt-burg."  The  .igreement  would  have  been  re- 
\  lid  t\iii  if  they  had  not  accepted  the  agency  for  tlu'  .Admirals, 
lliiwne,  p    1^77  S.    See  also  report  of  Charles  K.  Brown,  n.  1647. 

Love.  Sunshine  Co..  Johnstown,  Pa..  May  2(),  iSq^.  They  were 
tl..'  ag(nt>  of  the  National  Coin)iany  and  put  thiir  whole  force 
into  selling  the  N.ilional  Company's  goods.     Browne,  p,  i  UV 

Martin  &  Co.,  Pittsburg,  I'.i,  .May  26,  I.So^  1  i'r\  were  "ex- 
traiirdinurily  active"  in  [)U;hing  .Admirals.    They  were  trying  to 

•Op.  cit.  N.  Y.  Trust  Invcstifjalion,  t^iy,  pp.  (jij-<;ii. 


:MdiLJ 


146  Industrial  Combinations  and  Trusts 

displace  tlu-  A.  T.  Co.".  goods  and  boa.tcd  .^.altlu^  would^io 
Nvith  Ihcm.    Brown.,  p.  i.34').    ^''^^  ^^^^  report  of  Lharlc.  L.  Brown, 

''■  M ^F  II.  Woerner,  Manayunk,  Pa.,  May _  20th,  1893.  Was 
'trying  to  pu.h  and  urj^e  the  .ale  of  Admirals.'     Brown,  pp.  i334> 

'lohn  Schwartz,  Ilazleton,  Pa..  May  26,  1893.  Took  in  Admir  d 
Ciia  ttcs  ■  Al  order,  for  or  taken  by  the  National  O^arctte 
a^d  Tobacco  Con.pany  men  and  by  his  own  men,  with  h,s  own 
wa-on,  were  filled  by  him."    Brown,  p.  L  ■  638. 

lulm  Ranch,  Indianapolis,  Ind.,  June  14,  ^^^93-     Was  cut  o 
"for  the  intere  t  he  took  in  the  Admiral  Cigarette,  the  activity   n 
thir  distribution  and  .0  on."    He  was  al.o  very  fnendly  with  tn 
ofl    er   of  the  National  Company,  who  were  then  making  a     great 
big  di>play  ^vith  their  "No  Trusf  advertisements  in  Indian- 

apolis.     Brown,  p.  I3''3-  ,  .,.,        ,    „  TtT-      t,,1v  h 

'August  Rickebush  Tobacco  Company.  ,^  ll^^'^^'^^f^' ^J'^-^^K'; 
I  So  J  They  were  agents  for  the  National  Cigarette  and  Tobacco 
Co  and  are  regardc^d  as  part  of  that  company  themselves.  They 
also  cut  prices  on  tobacco  and  advertised  their  own  goods  as  not 
mad<  by  a  Trust."     Brown,  p.  1351- 


C  A.  Whelan  &  Co.,  Syracuse,  N.  Y.,  May  2,  iSc;2.  George 
Whelan.  the  comininy  of  that  concern,  became  an  employee  of  t  u 
Na  i  m-  1  Ci^-are  le  and  Tobacco  Cn.pany  at  a  salary  of  fcur 
Tht  i  dollars  a  year,  and  they  immedi.itely  began  pushmg  the 
"Royal  Sweet  Cigarettes,"  which  we  considered  an  imitation  ol 

ours.    Brown,  p.  I. S4'.  ,,  .,  »-^,,  ^    ,0,,, 

Boston  Cigar  and  Tobacco  Co.,  Boston,  Mass.,  May  4.  ^^ 
"  .X  R  Mit.  •  ell  &  Co.  had  the  agency  for  the  Royal  Sweet  C  iga- 
rJttes.  and  the  Boston  Cigar  and  Tol,acco  Co.  were  actrve.>.  as  the 
sub-agents  of  these.  i.u4iing  them  Brown,  p.  1313-  ^e'-'  '''^*' 
renort  of  R.   R.   Lawrence,  p.    1540. 

Brewster.  Crittenden  &    Co..    Rochester    V  \  ..  May  9,    S., 
Were  en'  -  (T  f^r  handling  "Royal  Swe.  is  Imitation  Cigarete> 
SS' Sleeper  &  Co.,  Bo;t.m,  Mass.,  July  12.  iSgS-    A  member  0. 
'  Thus  in  original— lid. 


Factors'  Agreements 


H7 


this  firm  became  president  of  the  I^xecutive  Association  of  the 
Wholesale  Grocers  of  New  En<,'kind,  who  were  lighting  the  A.  T. 
Co.,  and  pushing  the  Royal  Sweet  cigarettes.  The  agency  had 
entered  into  an  agreement  with  the  National  Cigarette  and  To- 
hacco  Company  to  give  its  gt)0(is  the  preference,  for  which  it  was  to 
receive  the  sum  of  about  S,:i5,ooo.  S.  S.  Sleeper  &  Co.  had  carried 
(lUt  the  agreement  of  the  association  and  had  their  windows  full  of 
the  imitation  cigarettes.     Brown,  pp.  1544,  154O. 


y 


FOR  H.\NDLIXG  OTHER   CIGARETTES  THAN*  THOSE   MVDK   BV 
THE  .N.A.TIUN.\L  CU.ARKTTE  AND  TOBACCO  COMPANY. 

Boston  Cigar  and  Tobacco  Co.,  Boston,  Mass.,  June  i  v  i8qv 

VVe'^t.  Stone  &  Co.,  Si)ringtield,  Mass.,  July  15,  iSq^ 

The  Boston  f'igar  and  Tobacco  Co.  was  an  otTshoot  of  .\.  R. 
.Mitchell  &  Co.,  who  had  taken  me  agency  for  \cw  Kngland  for 
the  sale  of  the  "Beauty  Bright"  cigarettes,  and  A.  R.  Mitchell  Si 
Co.,  and  the  Boston  Cigar  and  Tobacco  Co.  were  actively  pushing 
and  urging  the  sale  of  •'  Beauty  Brights"  in  preference  to'the  A.  T. 
Cu.'s  goods.     Bruwn,  pp.  1521,  0,22  and  137O. 

\Ve^t,  Stone  &  Co.,  A.  R.  Mitchell  tS;  Co.  and  the  Bo-ton  Cigar 
and  Tobacco  Co.  were  just  the  same  a--  one  (oncern  with  branches. 
Ail  of  them  were  distributing  "Beauty  Brights"  to  the  detriment 
I  !  the  .V.   T.  Co.'s  brands.     Brown,  j\  1  ^7^). 

Charles  .Mc.\rthur,  buying  agent  for  West,  Stone  &:  Co.,  180-5, 
says  that  "  We^t,  Stone  !v:  Co.  made  an  agreement  with  Mr.  Rich- 
ards of  .\.  R.  Mitchell  &  Co..  under  which  they.  West,  Stone  &  Co., 
were  to  have  the  sole  and  exduNive  agency  of  the  goods  (Beauty 
Hrights)  for  the  city  of  Springlield,  and  in  consi<leration  they  were 
to  pu>h  the  goods  to  the  exclusion  of  all  (.thers  anri  receive  an  extra 
l>onus  of  5  i)er  cent."  He  further  say>  that  he  was  one  of  th.'  sales- 
men and  know-  that  they  did  push  Beauty  Bright  goods  to  the  ex- 
clusion of  all  other  paper  cigarettes  for  a  time.  That  he  did  it  him- 
self (pp.  1777-1770). 

Total,  2. 

Total  revocations  for  handling  other  goods,  36. 

L!-i  or  (OXSIC.MES  OR  DEALERS  WHO  TESTIFH'D  THAT  THFY 
\M.KE  NOT  AI  I.OWl  I)  To  M.I.!,  o!'r().>l  1  ION  GOODS  I'NDER  THE 
CUNSIGN.Ml.Sr  A(,RKENn;NI     MIT  WERl.  NOT  t  I'T  OI  :■ 

Hubart  J.  Park,  of  Park  and  Tilford,  .-ays  that  this  linn  at  one 
lime  received  upon  consignment  25,000  cigarettes  from  the  National 


:Aiyi^.. 


14S  Industrial  Combinations  and  Tri'sts 

ri-iret  to  and  To])acco  Comi^n v.  That  after  they  began  to  sell  the 
^ame  Mr  I  u  ler,  secretary  .ithe  A.  T.  Co.  called  h..  attentjon 
o  the  sixth  clause  of  the  consignment  agreement,  |^nd  ^^"1^^;;;^ 
'if  we  continue  to  sell  the  National  cigarettes  it  ^Y.uld  all.nv  them 
to  g^vx-Tthe  discount  or  not  as  they  saw  f.t  on  the  Amencan  To- 
Kkco  Company  cigarettes;  it  was  a  violation  of  the  contract,  and 
we  l.K,ked  at  the  contract  and  we  sent  the  goods  back  p.  4.). 
He  urther  said  that  Mr.  Butler  did  not  say  anything  about  redw- 
ing [oi't  or  consign  any  other  goods  if  Park  &  Tilford  kept  the  Na- 

'^eS"SE>?:hat^M;'llutler  gave  hin.  to  understand  th.u 
het.1/ violating  tie  contract  and  that  the  A.  T,  Cc.  -uld  n;.  c.v 
tinue  their  discount  if  he  handle.l  other  than  the  A.  T   Lo.  s  c  k^i 
rentes  or  any  in  competition  -.vith  them.     That  he  violated  their 
agreement   (p.    19^)). 


MONV  AND  THAT  Ol    MR.   BROWN. 

Revoked   before    March    i,    iSq;,. 
Gildcrhouse,  Wilfmg  &  Co..  St.  L.mis.  Mo.,  June  ft,  iSg:.  Brown, 

''S^sman  Brothers.  New  York  city,  June  ..,  iSg3.     Brown,  p. 

'^^X.'f.  Cunningham  &  Co.,  Philadelphia,  Pa.,  November  :i,  iSq2, 

"^  wi^u-;ii^;;cS>'co..  Americus,  Ga.,  December  ,,  .8<p.  Brown, 
p.  :o7. 

Total  4-  X.      .  w 

Revoked   aMer   March    i,    i^OV 

Henrv    Berbert.  Bmoklvn.  \.  V.,  May  2O,   iSo^  ..nd  June  .q, 
iSo;      Brown,  p.   i^i^;  l^iiibert,'  pp-  .S.S^-^SO- 

S^Ben  amin.'Brooklvn.  N.  V..  June  U..  1S03.  Brown    p.  n. 

.\   &  \V    Diamond,  New  N  ork  dly.  June  10,  iSq,^   and  June  i^. 
TSni      Brown    P    UU;  Arnold  Diamond,  pp.  4^S.  4^'>.  4V^.  4W 

m'  II   Rieders.  NVw  Vork  city.  June  u,,  iSo^  and  June  xS,  1894- 
Brown,  p.  13O4;  Kicder>,  pp.  ,v\r3«5-  .^87.  38«- 
'  Thu:s  in  original.— Kd. 


Factors'  Agreements 


149 


h.  Bcrschatsky,  Brooklyn,  N.  Y.,  June  19,  1S93  and  June  18, 
1S04.    Brown,  p.  1^12;  Berschiitsky,  pp.  444,  445,  448. 

I.  Jackson,  New  York  city,  June  20,  1893  and  July  20,  1893. 
Brown,  p.  1339. 


I. 


Exhibit  8 


1 


r 


DR.    MILES   MEDICAL   COMPANY   t'.    JOHN    D.    PARK   &   SONS 
COMPANY ' 

The  complainant  Dr.  Miles  Medical  Company,  an  Indiana 
(•iiri)iiration,  is  engaged  in  the  manufacture  and  sale  of  [)ro]irietary 
nitijicines,  prepared  !)y  means  of  secret  methods  and  formulas  and 
iikntilied  by  distinctive  packaj^es,  labels  and  trade-marks.  It  has 
e-t^ihlishetl  an  extensive  trade  throughout  the  United  States  and 
in.  certain  foreign  countries.  It  has  been  its  practice  to  sell  its  medi- 
cines to  jobbers  and  wholesale  druggists  who  in  turn  sell  to  retail 
liruugists  for  sale  to  the  consumer.  In  the  case  of  each  remedy,  it 
h.i>  fixed  not  only  the  price  of  its  own  sales  to  jobbers  and  wholesale 
dealers,  but  also  the  wholesale  and  retail  prices.  The  bill  alleged 
that  most  of  its  sales  were  made  through  retail  druggists  and  that 
the  demand  for  its  remedies  largely  depended  upon  their  good  will 
anl  commendation,  and  their  ability  t'  realize  a  fair  profit;  that 
(irtain  retail  establishments,  iiarticularly  those  known  as  depart- 
nunt  >tores,  had  inaugurated  a  'cut-rate"  or  "cut-price"  system 
which  had  caused  "much  confusion,  trouble  and  damage"  to  the 
complainant's  business  and  "injuriously  atTected  the  reputation" 
and  "dejileted  the  sales"  of  its  remedies;  that  this  injury  resulted 
"  from  the  fact  that  the  majority  of  n  tail  druggists  as  a  rule  cannot, 
(rr  l/ilieve  that  they  cannot  realize  sulTicient  protits"  by  the  sale  of 
the  medicines  "at  the  cut-prices  announced  by  the  cut-rate  and 
department  stores",  and  therefore  arc  "unwilling  to,  and  do  not 
kLij)"  the  medicines  "in  stock"  or  "if  ke{)t  in  stock",  do  not  urge 
or  :avor  .-ales  thereof,  l)ut  endeavor  to  foist  oil  some  similar  remedy 
or  substitute,  and  from  the  fact  that  in  the  public  mind  an  article 
ailvertised  or  announced  at  'cut'  or  'reduced'  price  from  the  es- 
t  ilili>hed  price  sutlers  loss  of  reputation  and  becomes  of  inferior 
value  and  demand." 

It  was  furttier  alleged  that  for  the  purpose  of  protect intr  "its 
trade  sales  and  business"  and  of  conserving  "its  good  will  and  rcpu- 

'  2io  U.  S.  373. 


150  Industrl\l  Combinations  and  Trusts 

tation"  the  complainant  had  estai.lished  a  method -of  governing, 
rigXting  and  controlling  the  .ale  and  marketing  "of  Us  remedies, 
which  is  thus  described  in  the  bill: 

Contract,  in  writing  were  required  to  be  executed  by  all  jobber. 

and  Resale  druggists  to  whom  your  orator  -  ;^  .ts  aforesaid 

remedies,  medicines  and  cures,  of  the  following  tenor  and  eflect. 

''Cinnknmcnt  Contract— Wholesale. 

"The  Ur.  Miles  Medical  Company. 

"This  agreement  made  by  and  between  the  Dr.  Miles  Medical 
Company  a  corporation,  of  Elkhart.  Indiana,  herealter  referred  lu 
as  T  Proprietor,  and heremaiter  referred   to  as  the 

""""^^ll^^t^ncior  hereby  appoints  said  Consignee  one 
of  it  Wholesale  Distributing  .\gents,  and  agrees  to  consign  to  such 
Co  i-  nee  for  sale  for  the  account  of  said  Proprietor  such  g  .ods  u 
k  manufacture  as  the  Proprietor  may  deem  necessary  the  t  tie 
he  eto  and  pr-.perty  therein  to  be  and  remain  .n  the  Proprietor 
abilutelyuilil  sold  under  and  in  accordance  with  the  provisions 
i.r  of  ■  nd  all  unsold  goods  to  be  immediately  returned  to  s.u 
PropHetor  oniemand  ami  the  cancellation  of  this  agreement,  haul 
goods  to  be  invoiced  to  consignee  at  \^- ^^^^!^^:!^^-      ,j,,,„ 

"Medicines,  of  which  the  retail  price  is  Si.oo,  SS.oo  pej  do/.ui. 

"  Medicines  (if  any)  of  which  the  retail  price  is  50  cents;  ^4.00  per 

'^''"  Medicines,  of  which  the  retail  price  is  25  cents:  S-'^oo  per  dozen 
"Freight  on  all  orders,  the  invoice  price  of  which  amounts    0 
Sioo.^  or  more,  to  be  prepaid  by  the  i«roprietor;  otherwise,  freight 

^^-S^S^cSni^S;^^  to  conhne  the  s  ile  of  all  goods  and  prod- 
ucts o   the  said  Proprietor  strictly  to  an.l  to  sell  only  to    he  des.  - 
n  itt-d  Reta  1  Agent '  of  said  Proprietor  as  specU.ed  in    ists  of  sud 
Recall  Agen  s  furnished  by  said  Proprietor  and  alterable  at   he  . , 
of  said  I'ro,,^'-tor,  and  to  faithfully  and  promptly  account  and  ; 
to  the  Proprietor  the  proceeds  of  all  sales,  after  deducting  as  lull 
compensa   o^or  all  services,  charges  and  disbursemen  s  a  con - 
mission  of  ten  per  cent  of  the  invoice  value,  and  a  further  co    - 
misX.n  o    five  per  c-nt  on  the  net  amount  of  each  cons.gnmen  . 
a    er      c  uc  ing  fhe  sai-l  ten  per  cent  commission  on  all  advances  on 
a  cunt  remitted  within  ten  days  iMm  date  of  any  -nsignmcn^ 
k  be'n.  aureed  between  the  parties  hereto  that  such  ac.   ances  shall 


Factuks"  .\grf:ements 


151 


iii  no  manner  affect  the  title  to  such  goods,  which  title  shall  remain 
in  the  Troprietor  as  if  no  such  advances  has  been  made;  [)rovided 
ili  .t  such  advances  shall  be  repaid  to  said  Consignee  should  the 
- .  M  Proprietor  terminate  this  agreement  and  the  return  of  any  un- 
.-ulil  goods  on  which  advances  have  been  made.  Said  Consignee 
;_'uarantees  the  payment  for  all  goods  sold  under  this  agreement  and 
agrees  to  render  a  full  account  and  remit  the  net  proceeds  on  the 
lir~t  day  of  each  month  of  and  for  the  sales  of  the  month  preceding. 
Failure  to  make  such  accounting  and  remittance  within  ten  days 
from  the  first  of  each  month  shall  render  the  whole  account  payable 

>\  subject  to  draft,  but  the  jjroceeds  of  such  draft  shall  not  alTect 
i.ii  title  of  any  unsold  goods,  which  shall  remain  in  the  Proprietor 
until  actually  sold,  as  herein  provided. 

"It  is  further  agreed  that  the  Consignee  shall  furnish  the  Pro- 
[irittor  from  time  to  time  upon  demand  full  statements  of  the  stock 
III  goods  of  the  Proprietor  on  hand  on  any  date  specified  and  that  a 
failure  to  furnish  such  statements  within  ten  days  from  date  of  such 
lUniand  shall  be  a  sufficient  cause  for  the  cancellation  of  this  agree- 
ment, and  a  demand  for  the  return  of  the  consigned  goods. 

"It  is  further  agreed  that  the  Proprietor  will  cause  each  retail 
package  of  its  goods  to  be  identilied  by  a  number  and  said  Consignee 
iurehy  agrees  to  furnish  the  said  Proprietor  full  repc^rts  upon  proper 
( anis  01  blanks  furnished  by  said  Proprietor  of  the  disjiosition  of 
cath  duzen  or  fraction  of  such  goods  by  means  of  the  identifying 
numbers,  specifying  the  names  and  addresses  of  the  Retail  Agents 
to  whom  such  goods  have  been  delivered  and  the  dates  of  such 
(]( livtry,  and  to  send  such  reports  to  said  Proprietor  at  least  semi- 
nmnthly,  and  at  any  other  time  on  the  rerjuest  of  said  Proprietor. 

"It  is  understtn)d  and  agreed  between  the  parties  hereto  that 
t!u'  commissions  herein  specified  shall  not  be  considered  as  earned 
by  Slid  Consignee  upon  any  goods  of  said  Proprietor  which  shall 
have  been  delivered  to  dealers  not  authorized  agents  of  said  Pro- 
prietor, as  per  list  of  such  agents,  or  upon  any  goods  whose  disposi- 
tinn  by  said  Consignee  shall  not  have  been  properly  reported  as 
hi  rein  provided,  or  sold  at  prices  less  than  the  prices  authorized, 
niid  that  >aid  Consignee  shall  not  credit  any  such  commissions  when 
making  remittances  on  consignment  account  provided  notice  has 
bren  given  by  said  Proprietor  that  such  commissions  are  unearned; 
iind  that  if  such  unearned  commissions  have  birii  deducted  by  said 
('"H^ignee  in  making  advance  payments  or  monthly  remittances  tm 
acuiunt  they  shall  be  charged  back  to  said  Consignee  and  credited 


,52  Industrial  Combinations  and  Trusts 

nnd  tn-ul  to  said  Proprietor.  U  i.  understood  that  violation  or 
nonob  rvance  of  anv  provision  hereof  by  the  C on^.^nee  ff^^^ 
?his  a-'reenunt  term'inat;lc  and  all  unsold  goods  returnable  at  the 

^^"'U  i^Ul^d  tSr  .  .ods  of  said  Proprietor  shall  be  sold  by 
said  Con'i™  only  to  the  said  Retail  or  Wholesale  yt;ents  of  said 
lioprieto^rLs  per  li'^t  furnished,  at  not  le,s  than  the  following  prices, 

'''^•Medicines,  of  which  the  retail  price  is  Sx-oo;  SS^o  per  to 
"Medicines  (if  any)  of  which  the  retail  price  i.  ,o  cents,  §4.00 

^''•-  Malicines,  of  which  the  retail  price  is  25  cents;  S2.00  per  dozen 
•'Pro-hied,  that  said  Consignee  may  allow  a  cash  discount  not 
exceeding  one  per  cent,  if  paid  within  ten  days  from  date  of  invoice 
and  thit     hen  sales  at  one  time  and  at  one  invoice,  amount  to 
Sx   .00  or  L.re,  the  said  Consignee  may  allow  three  pcr  cent  trad 
d  scount  and  if  said  purchase  amounts  to  S?o.oo  or  more,  fixe  per 
cent  u"u  c  dLount,  all  without  cost  to  the  Proprietor,  and  if  such 
Sso  00    uantitv  shall  be  shipped  direct  to  the  retail  P^^^^^^ 
the  labc  ratorv'of  said  Proprietor,  on  the  order  from  said  Whole  ale 
Di^tSng  Agent,  freight  will  be  prepaid  by  the  Proprietor,  but 

""'•its^intract  will  take  effect  when  the  original,  duly  signed 
bv  the  Con^i^nee.  has  been  received  and  accepted  by  The  Dr. 
Miles  Medical  Company,  at  Elkhart,  Indiana. 

"Done  under  our  hands — -^ — .  -^-  ^-  '^QO?- 

"Fill  in  date  on  above  line. 

"the   1)K.    MlLl-.S   MF.riCAL   COMPANY. 

-,  Wholesale  Dealer. 


"Sign  your  name  on  above  line. 
"OriginaL    Return  in  Enclosed  Envelope." 
"And  written  contracts  were  required  with  all  retailers  of  your 
orator's  said  proprietary  remedies,  medicines  ana  cures,  as  {ollo^... 

'•R,tail  Af^ntry  Contract. 
"The  Dr.  Miles  Medical  Company. 
"This  agreement  between  The  Dr.  Miles  Medical  Company  of 

Elkhart,    Indiana,    and ; 

"  Retailer's  Name  on  above  line. 


of- 
Town.     State. 


'hereinafter  referred  to  as  Retail  Agent,  witne^seth. 


Factors'  Agreements 


153 


ur 


3 


"Appointed  A^ent. 

"The  said  Dr.  Miles  Medical  Company  hereby  appoints  said  Re- 
tail Dealer  as  one  of  the  retail  distributing  a;;ents  of  its  Proprietary 
Medicines  and  agrees  that  said  Retail  Agent  may  iiurchase  the 
Proprietary  Medicines  manufactured  by  said  Dr.  >iili--  Medical 
Company  (each  retail  package  of  v. hich  the  -aid  Company  will 
cauM  to  be  i'ient.licc  Ijy  a  number)  at  the  following  prices,  to  wit: 

"Wliolcsdle  Prices. 

"Medicines,  of  whicii  the  retail  price  is  Si. 00;  SS.oo  per  do/.en. 
"  Medicines,  of  which  the  retail  price  is  50  cents;  $4. 00  ])er  ijozcn. 
'  .>ledicines,  of  w  lich  the  r<  tail  price  is  25  cents;  $;.oo  per  dozen. 

"'Quantity  Discount. 

"Provided  that  when  purchases  at  one  time  and  on  r-c  invoice 
amount  ',0  Si 5.00  (or  more),  Wholesale  Distributing  Agents  are 
authorized  to  allow  3  per  cent  trade  discount;  if  such  [jurchase 
amounts  to  S50.00  (or  more)  5  per  cent  trade  discount  will  be  al- 
lowed, and  if  such  S50.0C  '  iuanlit\  be  shi[)ped  direct  to  the  pur- 
chaser from  the  laboratory  oi  >aid  Dr.  Miles  Medical  Company  for 
the  :.  count  of  such  Wholesale  Agent,  freight  w.  .  be  prepaid  but 
nut  otherwise. 

"Full  Price. 

"In  consideration  whereof  said  Retai.  Ai  nt  agrees  in  no  case 
t  .  sell  or  furnish  the  said  Proprietary  Medicine  to  any  person, 
tirm  or  corporation  whatsoever,  at  less  than  th.  full  retail  price 
a>  printed  on  the  ])ackagcs,  without  reduction  for  quantity;  and 
said  Retail  Agent  further  agrees  not  to  sell  the  said  Proprietary 
Medicines  at  any  price  to  Wholesale  or  Retail  dealers  not  accred- 
ited agents  of  the  Dr.  Miles  Medical  Company. 

'  Violation. 

"It  is  further  agreed  between  the  parties  hereto  that  the  giving 
of  any  article  of  value,  or  the  making  of  any  concession  by  means 
')f  trading  stam]  ,  cash  register  coupons,  or  otherwise,  for  the  pur- 
.lore  of  reducing  the  price  above  agreed  upon  shall  be  considered  a 
violation  of  this  agreement,  and  further  is  agreed  between  the 
parties  hereto  that  Dr.  Miles  Medical  Company  will  sustain  dam- 


ii 


154  Industrial  Combinations  and  Trusts 

a.o  in  the  sum  of  twenty-five  dollars  (S25-OoHor  each  violation  of 
fnv  provision  of  this  a/reemcnt,  it  being  otherwise  impossible  to 

'^^^h^^n^niclS^kc  e^ectwhen  a  duplicate  thereof,  duly 
si.nifVtSe  Kctail  A.ent,  has  been  ^^^^^J^^'  ^^ 
The  Dr.  Miles  Company,  at  its  otlice  at  Llkha    ,  Indiana. 

"Done  under  our  hands • '^-  ^-  ^y^/* 

'•Fill  in  dale  '>n   above  line. 

••Tin.    DK.    MU-i:S    MF.mC.XL   COMP.\NY, 

" . ,  Retail  Dealer. 

'•Sign  your  name  on  above  line  in  ink. 

'''^'pfste'i^iJu-il  laiKl,  giving  name  and  address,  that  your  name 
mav  be  correctly  listed. 

••Dunlicate.      Keep   for   reference. 

.\   an    S  to  the  maintenance  of  the  prices  thus  fixed  the  company 
do'vi^ed  a  system  for  tracing  and  identifying,  through  serial  numbers 
nd  cards   each  wholesale  and  retail  package  o    its  products. 
It  was  alleged  that  all  wholesale  and  retail  druggists,  "and  all 
dea  e^sTn  nrcn^rietary  medicines,"  had  been  given  full  opportunity 
'hout  discrimination,  to  sign  contracts  in  the  form  state^,  an 
That  such  contracts  were  in  force  between  the  complainant     and 
ovfr  four  hundred  jobbers  and  wholesalers  -d  t-nty;^^^ 
sand  retail  dealers  in  proprietary  medicines  in  the  Lnittd  btates 

The  de  endant  is  a  Kentucky  corporation  conducting  a  wholesale 
drug  bu   ness.     The  bill  alleged  that  the  defendant  had  formerl); 
deaU  ^^th  the  complainant  and  had  full  knowledge  of  all  the  facts 
relating  to  the  trade  in  its  medicines;  that  it  had  been  requested 
and  refused,  to  enter  int.,  the  wholesale  contract  recjuired  by  the 
com,  k  inan  ;  that  in  the  city  of  Cincinnati,  Ohio,  where  the  defend- 
'n^c  m<lucte  1  a  wholesale  drug  store,  there  were  a  large  nuniber  o 
i  ho    sale  and  retail  druggists  who  had  made  contracts,  of  the  sor 
dt's cribed,  with  the  complainant,  and  kept  its  medicines  on  sa 
pursuant  to  the  agreed  terms  and  conditions.    It  was  charged  tha 
he  clcfendant,  "in  combination  and  conspiracy  with  a  number  of 
who  sale  and  retail  dealers  in  drugs  .nd  proprietary  medicmes, 
who  have  not  entered  into  said  wholesale  and  retail  contracts    re- 
;    ied  bt  the  complainant's  system  and  solely  for  the  purpose -J 
sellint'  the  remedies  to  dealers  "to  be  advertised,  sold  and  marseau 
at  cut- rates'  and  "  to  thus  at t  ract  and  secure  custom  and  patronage 
for  other  merchandise,  and  not  for  the  purpose  of  makmg  or  re- 


Factors'  Agreements 


155 


CL'iviriR  a  direct  money  prolit"  from  the  sales  of  the  remedies,  had 
unlawfully  and  fraudulently  procured  them  from  the  complainant's 
"wh(;lesale  and  retail  agents'  by  means  "of  false  and  fraudulent 
representations  and  statements  and  by  surreptitious  and  dishonest 
methods,  and  by  persuadinj,'  and  inducing,  directly  and  indirectly," 
a  \iolation  of  their  contracts. 

It  is  further  charged  that  the  defendant,  having  procured  the 
remedies  in  this  manner,  had  advertised  and  sold  them  at  less  than 
the  jobbing  and  retail  prices  established  by  the  complainant;  and 
that  for  the  purpose  of  concealing  the  source  of  supply  the  identi- 
fying serial  numbers,  which  had  been  stamped  u[)on  the  labels  and 
cartons,  had  lieen  obliterated  by  the  defendant  or  by  those  acting 
in  collusion  with  the  defendant,  and  the  labels  and  cartons  had  been 
mutilated  thus  rendering  the  list  of  ailments  and  directions  for  use 
illegible,  and  that  the  remedies  in  this  condition  were  sold  both  to 
the  wholesale  and  retail  dealers  and  ultimately  to  buyers  for  use 
at  cut  rates. 


Mr.  Justice  Hughes,  after  making  the  above  statement,  de- 
livered the  opinion  of  the  court. 

The  complainant,  a  manufacturer  of  proprietary  medicines  which 
are  prepared  in  accordance  with  secret  formulas,  presents  by  its 
bill  a  system,  carefully  devised,  bv  which  it  seeks  to  maintain  cer- 
tain prices  fixed  by  it  for  all  the  sales  of  its  products  both  at  whole- 
sale and  retail.  Its  purpose  is  to  establish  minimum  prices  at  which 
.-ales  shall  be  made  by  its  vendees  and  by  all  subsecjuent  purchasers 
who  trailic  in  its  remedies.  Its  plan  is  thus  to  govern  directly  the 
entire  trade  in  the  medicines  it  manufactures,  embracing  interstate 
commerce  as  well  as  commerce  within  the  States  respectively.  To 
accomplish  this  result  it  has  adojUed  two  forms  of  restrictive  agree- 
ments limiting  trade  in  the  articles  to  those  who  become  parties  to 
one  (jr  the  other.  The  one  sort  of  contract  known  as  ^^Consignment 
Contract — Wholesale,"  has  been  made  with  over  four  hundred  job- 
bers and  wholesale  dealers,  and  the  other,  described  as  "Retail 
A t^cmy  Contract,"  with  twenty-live  thousand  retail  dealers  in  the 
United  States. 

The  defendant  is  a  wholesale  drug  concern  which  has  refused  to 
enter  into  the  required  contract,  and  is  charged  with  procuring 
medicines  for  sale  at  "cut  prices"  by  inducing  those  who  have  made 
the  contracts  to  violate  the  restrictions.    The  complainant  invokes 


1^0 


Industrial  Combination's  and  Trusts 


the  established  doctrine  that  an  actionnMc  wronR  is  comnatted  by 
one  who  maliciously  interferes  with  a  contract  between  two  parties 
and  induces  one  of  them  to  break  that  contract  to  the  injury  ot  the 
oth-r  and  that,  in  the  absence  of  an  aaequate  remedy  at  law,  eciui- 
table  relief  will  be  granted.  .1  >v^lc  v.  Chiai^o,  St.  Paul,  Almncapolis 
6-  Omaha  Kailnay  Co.,  151  U.  S.  i;  liitkrman  v.  Louimue  ^  .^a:>h- 
xille  Railroad,  207  U.  S.  205. 

The  principal  question  is  as  to  the  validity  of  the  restrictive 

agreements.  . 

Preliminarily  there  are  opposing  contentions  as  to  the  construc- 
tion of  the  agreements,  or  at  least  of  that  made  with  jobbers  and 
wholesale  dealers.  The  complainant  insists  that  the  "  consignment 
contract"  contemplates  a  true  consignment  for  sale  for  account  of 
the  complainant,  and  that  those  who  make  sales  under  it  are  the 
complainant's  agents  and  not  its  vendees.     ... 

There  are  certain  allegations  in  the  bill  which  do  not  accord  with 
the  complainant's  argument.  Thus  it  is  alleged  thai  it  "  has  been 
and  is  the  uniform  custom"  of  the  complainant  '"to  .-ell  said  medi- 
cines remedies  and  cures  to  jobbers  and  wholesale  druggists,  who 
in  turn  sell  and  dispose  of  the  same  to  retail  druggists  for  sale  and 
distribution  to  the  ultimaie  purdi.iser  or  consun.er."  And  in  set- 
ting forth  the  form  of  the  agreement  in  (luestion  it  is  alleged  that 
it  WLis  "required  to  be  executed  by  all  jobbers  and  wholesale  drug- 
gists to  whom  >our  orator  sold  its  aforesaid  remedies,  medicines 
and  cures."     .... 


The  other  form  of  contract,  adopted  by  the  comphiinant,  wh:le 
described  as  a  "retail  agency  contraC."  is  clearly  an  agreement 
looking  to  sale  and  not  to  agency.  The  -o-called  "retail  agents 
are  not  agents  at  all.  eith<T  of  the  comi)lainant  or  of  its  consignees, 
but  are  contemi)lated  purcha-ers  who  buy  to  sell  again,  that  .s, 
retail  dealers.  !t  is  agreed  that  they  may  i)urcha-e  the  medicines 
manufactured  by  the  complainant  at  stated  prices 


It  will  be  noticed  that  the  "retail  agents"  are  not  fori  Ion  to 
sell  either  to  wholesale  or  retail  dealer-  if  thiM  an  ••accredile.i 
agents"  of  the  eompbiinant ,  tiiat  i--  if  the  dealers  have  signed  either 
Oi  the  two  .Mntracts  the  (cnij.laiiiant  require^.  lUit  the  re-^inction 
is  intended  to  apply  wheliier  the  retail  dealers  have  bought  the 


Factors'  Agreements 


157 


' 


Rooii-  from  those  who  held  under  consignment  or  from  other  dealers, 
wholesale  or  retail,  who  had  purchased  them.  And  in  which  way 
the  "retail  aRents"  who  suiiplied  the  medicines  to  the  defendant, 
had  l)ouf,'hl  them  is  not  shown. 

I  he  bill  asserts  com[)lainanl's  "rieht  to  maintain  and  preserve 
the  aforesaid  .system  and  method  of  contracts  and  sales  ado])ted  and 
established  by  it."  It  is,  as  we  have  seen,  a  svstem  of  interlock- 
ing restrictions  by  which  the  complainant  seeks  to  control  not 
merely  the  jirices  at  which  its  agents  may  sell  its  proaucts,  but  the 
prices  for  all  sales  by  all  dealers  at  wholesale  or  retail,  whether  pur- 
chasers or  subpurchasers,  and  ihus  to  tix  the  amount  which  the 
consumer  shall  pay,  eliminating  all  competition 


But  it  is  insisted  that  the  restrictions  arc  no*  invalid  either  at 
common  law  or  under  the  act  of  Congress  of  Ju.y  2,  iSgo.  c.  647, 
:6  Stat.  20(),  upon  the  following  grounds,  which  may  be  taken  to 
embrace  the  fundamental  contentions  for  the  coniplainant:  (i) 
That  the  nstrictions  are  valid  because  they  relate  to  proprietary 
medicines  manufacturer  under  a  secret  process,  and  (2)  that,  apart 
from  this,  a  manufacturer  is  entitled  to  control  the  i)rices'on  all 
sales  of  his  own  firoducts. 

l-'irst:  The  tirst  imjuiry  is  whether  there  is  any  distinction,  with 
respect  to  such  restrictions  as  are  here  presented,  between  the  case 
of  an  article  inanulactured  by  the  owner  of  a  secret  process  and  that 
of  one  {)roduced  under  ordinary  conditions.  The  complainant 
urges  .m  analogy  to  rights  secured  by  letters  patent 

Hut  whatever  riglits  the  patentee' may  enjoy  are  derived  from 
statutory  grant  under  the  authority  conferred  by  the  f'on-tilution. 
This  grant  is  based  upon  public  considerations.  The  [)ur|)iwe  of 
the  patent  law  is  to  stimulate  inventon  by  protecting  inventors  for 
a  fixed  time  in  the  advantages  that  may  be  derived  from  exclusive 
manufacture,  use  and  sale 

The  complain. int  has  no  statutory  grant.  So  far  as  appears, 
there  are  no  letters  patent  relating 'to  the  remedies  in  que.-tion.' 
I  lie  complainant  has  not  sten  tit  to  make  the  disoloMire  rrquirid 
liy  the  r-tatute  and  thus  t(<  secure  the  privileges  it  confers.  Its 
■  d-v  lies  o"tside  the  polic>  of  the  patent  law,  and  the  extent  of  the 
ni^ht  which  that  law  .secures  is  n.  t  here  involved  or  determined. 


\i-      -- 


158  Industrial  CoMniNAxioNS  and  Trusts 

Second.  We  come,  then,  to  the  second  question,  whether  'he 
complainant,  irrespective  of  the  secrecy  of  its  process,  is  ent>  led 
Jumah' tain  the  restrictions  by  virtue  of  the  fact  that  they  relate 
to  products  of  its  cwn  manufacture.  „^n„fnr 

The  basis  of  the  argument  appears  to  be  that,  as  the  manufac- 
turer may  make  and  sell,  or  not,  a.  he  chooses,  he  may  affix  con  1- 
tk^ns  as  V^  the  use  of  the  article  or  as  to  the  pnces  at  which  pur- 
chasers may  dispose  of  it.  The  propriety  of  the  re-^traint  is  sought 
to  be  derived  f'om  the  liberty  of  the  producer. 

But  because  a  manufacturer  is  ..ct  bound  to  make  or  sell,  it 
does  not  follow  that  in  case  of  sales  actually  made  he  may  impose 
UDon  purchasers  every  sort  of  restriction.     •.••.■  . 

T.r  can  the  manufacturer  by  rule  and  notice,  in  the  absence  of 
contract  or  statutory  right,  even  though  the  rertriction  be  kn"vn  t'> 
mirchaser.  fix  prices  for  future  sales.  It  has  been  held  by  thi> 
OH      that'n^TsLch  privilege  exists  under  the  copyright  statute 

U lough  the  owner  of  the  copyright  has  the  sole  right  to  vend 
copies  of  the  copyrighted  production.     Bobbs-McrrdlCo.  v.  Straus. 

^'°  ^'  Whatever  right  the  manufacturer  may  have  to  projext  hi- 
control  beyon.l  his  own  sales  mu>t  depend  not  upon  an  inherent 
power  incident  to  production  and  original  ownership,  but  upon 
agreement. 

The  present  ca.e  is  not  analogous  to  that  of  a  sale  of  good  will, 
or  of  an  interest  in  a  business,  or  of  the  grant  oi  a  right  to  use  a 
process  of  manufacture.  The  c.mplainant  has  not  parted  u  th  an 
interest  in  its  buMne.s  or  instrumc.Ualit.es  o  production.  It  ha- 
conferred  no  right  by  virtue  of  which  purchasers  ol  >l;  I, >■;'■  "^^^^ 
mav  compete  with  it.  It  r -tains  complete  con  rol  over  the  bUM 
ness  in  which  it  is  er,gage<l,  manufa-turing  what  it  ,^eases  a..! 
fixing  such  prices  [or  it-  own  sales  as  it  may  desire.  Nor  arc  nu 
deding  with  a  single  transaction,  conceiv.d.ly  unrelated  to  th. 
nu  lie  in  irc-t.  The  agreements  an-  .lesigned  to  inamtam  pnce- 
^fter  the  .-omplainant  h's  parted  with  the  title  to  the  art-des,  and 
to  j)revent  competition  among  tnose  who  trade  in  them. 

But  agreements  or  combinati.^ns  between  dealers,  havin.  fur 
their  sou.  purpose  ih-  d.Mruction  of  -"'I'''^';-"/;"''  /.J^;',;;'";;; 
prices,  are  injuriou-  to  the  public  interest  and  v.„d.     1  bey  art  not 


Factors'  Agreements 


159 


saved  by  the  advantages  which  the  participants  expect  to  derive 

from  the  enhanced  price  to  the  consumer 

The  complainant's  plan  falls  within  Iheprinciple  which  condemns 
contracts  of  this  class.  It,  in  eiTect,  creates  a  combination  for  the 
pn,hi:..ted  purj'oses.  Xo  distinction  can  properly  be  made  by 
reason  of  the  particular  character  of  the  -ommodity  in  question. 
It  IS  not  entitled  to  special  privilege  or  immunity.  It  Ls  an  article 
of  commerce  and  the  rules  concerning  the  freedom  of  tra.ie  must  be 
h  Id  to  apply  to  it.  Nor  docs  the  fact  that  the  margin  of  freedom 
i>  reduced  by  tlie  rontrol  of  jiroduction  make  the  protection  of 
what  remamj,  'n  such  a  case,  a  negligible  matter.  And  where 
i-iiimodities  h---  ■  j  ssed  into  the  channels  of  trade  and  are  owned 
tiy  dealers,  the  wdidity  of  agreements  to  [)revent  competition  and 
to  inauUain  prices  is  not  to  be  determined  by  the  circumstance 
wluther  they  were  produced  })y  several  manufacturers  or  by  one, 
or  whether  they  were  previously  owned  by  one  (jr  by  many.'  The 
i-niplainant  having  sold  its  i)roduct  at  prices  satisfactory  to  it- 
M  It,  the  public  is  entilleci  to  whatever  advantage  may  be  derived 
I  roll!  competition  in  the  subsequent  traffic. 


CHAPTER  VIII 

INTERNATIONAL  ac;ri;':ments 

NOTK 

COMPARAI.VELV  speakinR,  in.crnali,,n.l  »>;'«";'";' ;-»;^«„'ur" 

'°\"rif",  rilhcr  R-markiUo  coinci.lcnc.-  that  the  two  most  famou- 

dciUical  sets  ot  circu:.i>tcinCLS.    in  uil  «-i  i,.rrUnrv  -icross 

r^.tion  the  \nic'-itan  manufacturers  invaded  the  territory  across 
the   vU  In  te  case  of  the  explosives  trade,  the  situation  vas 

^aah  he  re  U  e,  and  the  foreign  companies  were  thv  aR^r^or. 
in  each  case,  the  outcome  was  the  adoption  <.f  an  international 
airreement,  drafts  of  which  are  fjiven  lieL.w 

In  The  nineties  the  American   rol)acco  Company  c  ahh^itd  a 

£^';;t:iSSh,,^-:;hiS;^TS 
£-—■„;■■;;  th;:s^:aoa:i;f;i^^^ 

ol  inai  >cai  nurrh-ise  alimud  the  Hnti-.h  Manufacturer  . 

'nTthi;!;""  :.  tl' hi  '^^^  ncir!:^  in  England  united  to  form  the 
npHTl  I    ceo  Company.     This  or,.ini.ation  be,an  ^  acUve 
imi^iuu  .    .         j         nau-'urated   bv   the  Amenuin 

?Zcrc"i,  n  •  :u'l  th;::u.ned,  a-  a  part  of  Uieir  program  U. 
in  vadc'lhe  ter  it.rv  on  our  M.ie  -1  the  Atlant-c.  I  he  ui^^hol  of  tl- 
mattcT  wa.  an  arr-eement,  embodied  in  two  d..cumcnts.  which  wa. 

"t  ;"r^liru!n'f.S;n  manufacturers  of  blacU  powtler.  .Mo-u- 
to  ^au  iu^h  xploMve-  bepanthe  ercctit.n  of  factoru-s  in  amc,- 
,ur,  N  J.  intending  to  ent,  r  i.Uo  compeUfon  with  the  expbs  ve^ 
conibination  which  at  that  time  existcl  .n  '-;  "  ^^  ^^  J^^  ,• 
Kc-„re.enlatives  of  the  latter  visited  Europe,  tow.ird  the  close  oi 
1897.  anJ  began  ne,otiati..n.  with  the  foreign  manufacturers  .ho 

160 


International  Agrekment? 


i6i 


had  bcRun  factories  in  the  L  nited  State-.  A  draft  of  an  asrecnunt 
tmliodying  the  result  of  these  nej^otiutions  was  ratified  by  the 
An.crican  Companies.  This  agreement  has  he.  n  variously  styled 
the  London  Agreement,  Janiesburg  Af^'reemmt.  International 
Agreement,  and  Iluropean  A-reement.  It  was  dated  October  26, 
1907,  and  is  p.robably  th'  nic  -^t  interesting  single  document  among 
the  many  which  the  industrial  combination  and  trust  mo\enunt 
has  produced,  \nother  international  agreement  that  has  only 
recently  t  .me  to  light  is  the  A.  J.  ...  G.  Agreement  in  the  alumi- 
num trade,  e.xcerpts  f-  n  which  form  the  fourth  exhibit  of  this 
lb  n)ter. — Ed. 

ExiuriT  I 

U.KEF.MENT  OF  IE  AMERIC.\N  TOB.XCCO  COMPAN'  INTERESTS  AND 
rilE  IMPERIAL  rOB.U-CO  CO.Vl'ANV,  LI.MHII).  RKL.MIVi;  TO  THE 
[.iUITATION   OK    THE    SPHERE   OF    THE    oPKk.XTKiN    of    E.\CH,  .\ND 


THE    fR.\NSFER    OF    OCDEn's    LIMITI  I) 


An  agreement  made  the  twenty-seventh  day  of  September,  one 
thousand  nine  hundred  and  two,'between  Ogden's  Limited,  being 
:;  rompany  duly  incorporated  under  Engli.-h  law  (hereinafter  re- 
iLrred  to  a>  the  "Ogden  Company"),  of  the  lir-t  part;  The  Anieri- 
i.m  Tolxicco  Company,  a  corporation  organi/.ed  aiirj  existing  under 
and  by  virtue  of  the  laws  uf  the  State  of  \jw  [er^ey,  one  of  the 
StatCG  of  the  United  States,  of  America  (hereinafter  nferred  to 
a>  the  "American  C..mi)any"),  of  the  second  part;  Continental 
rol)acco  Company,  a  corporation  organized  and  e.xi-^ting  under 
and  by  virtue  of  the  laws  of  the  saifl  State  of  .New  Jers<-y  (herein- 
alter  referred  to  as  the  "Continental  (\)mp.iny'  ).  of  "the  third  part; 
.\nierican  Cigar  Comjjany,  a  corporation  organized  and  existing 
under  and  by  virtue  (if  the  laws  of  the  said  state  of  New  Jersey 
hereinafter  referred  to  as  the  ''Cigar  Comjuny"),  of  the  fourth 
part;  Consolidated  'I\)bacco  Company,  a  corjjoration  organized 
and  existing  under  and  by  virtue  of  the  said  laws  of  the  said  State 
of  New  Jersey  (hereinafter  referred  to  as  flie  "Consolidated  Com- 
pany"), of  the  fifth  part;  Hritish  Tobacco  Com|)anv,  Limited. 
hcing  a  company  incorporated  under  English  law  '(hereinafter 
rclerred  to  as  the  "Briti-h  Company'"),  of  the  sixth  'lart ;  and  the 
Imperial  Tobacco  Company  (of  Great  Hrit.iin  ,iiid  Inland  1.  Lim- 

'Rcptirt  of  the  Commissioner  of  Corporations  on  the    luliano   InikiNiry, 
F.jhila  ,\.i.  ,.  Part  1,  pp.  431  ff. 


l62 


Industrial  Combinations  and  Trusts 


ited    a  corporation  incorporated   under   English  law  (hereinafter 
referred  to  as  the  "Imperial  Company"),  of  the  seventh  part. 


14    Each  of  the  parties  hereto  of  the  first  six  parts  for  itseh  and 
not  the  one  for  anv  other-  agrees  and  shall  covenant  with  the  Im- 
perial Company  that  the  covenanting'  party  will  not  at  any  time 
alter  the  transfer  dav.  except  a~  hereinalter  expressly  excepted, 
either  -oUly  or  jointlv  with  anv  other  person  or  persons,  company 
or  companies,  directly  or  indirectly  carry  on  or  he  employed,  en- 
pa-'ed,  or  concerned,  or  interested  in  the  business  in  the  Lmted 
Kingdom  of  a  tobacco  manufacturer,  or  in  any  dealing  in  tobacco 
or  it"  products  therein,  or  sancti.-n  the  use  of  its  name  in  connec- 
tion with  any  such  lui>iness  therein,  save  so  far  as  the  covenanting 
company,  >hall,  as  a  meml)er  of  the  lmi)erial  Company  or  as  a  mem- 
be-  of  any  companv  manufacturing  cigars  in  the  United  States  or 
of  anv  t)ther  companies  formed  or  to  be  formed  with  the  concur- 
rence'of    the   Imperial    Company,  be   interested   in   the   business 
thereof,  or  through,  or  in  conni'ction  with  the  Imperial  Company, 
as  hereinafter  provided.      The  said  covenanting  parties  will  procure 
the  following  directors  or  some  or  one  of  them,  namely,  Janus 
Buchanan  Uuke,  Benjamin  Xewton  Duke,  Thomas  Fortune  Ryan, 
John    Blackwell    Cobb,    Williamson    Whitehead    Euller,    William 
Recs  Harris,  Percival  Smith  ilill,  and  Caleb  Cushing  I  )ula,  and  will, 
re^nectively,  use  their  best  endeavors  to  i)rocure  such  other  ihrec- 
toVs  as  >ha'll  Ije  reouired  by  the  Imperi.d  Company  to  enter  into  .1 
covenant  with  the  Imperial  Company  -imilar  to  that  referred  U> 
in  the  preceding  part  of  this  clause.  ,    ,    „  . 

15.  The  Imperial  Comi)any  similarly  agrees  and  shall  covenant 
with  the  .American  Comi)anv,  the  Continentid  Company,  the  Ciga' 
Company,  and  the  ConM)'lidated  Comi)any,  that  the  Imperial 
Ci)mpany  will  not  at  anv  time  after  the  transfer  day,  except  as 
hereinaftir  expres>ly  excepted,  either  solely  or  jointly,  with  any 
ollv  r  person  or  iKTSons,  company  or  companies,  directly  or  indi- 
rectlv  carry  on  or  be  emj^oved,  engaged,  concerned,  or  interested 
in  tliebuMuess  in  the  United  State-,  of  .i  l..b,ic(o  manufacturer  or 
in  any  dealing  in  tobacco  or  its  products  therein,  or  sanction  the 
use  of  its  name  in  connection  with  any  -uch  bu-iness  therein  save 
as  far  as  the  Imperial  Comjianv  shall,  as  a  member  of  any  other 
company  formed  or  to  be  forme'  "a"  'he  concurrence  ui  the  Ameri- 
can Company,  the  Continental  Company,  the  Ciga.  Company,  c: 


International  Agreements 


i6^ 


the  Consolidated  Company,  be  interested  in  the  business  thereof. 
and  save  and  except  that  the  Imperial  Company  shall  be  at  iibert\ 
t.i  buy  and  treat  tobacco  leaf  and  other  materials  in  the  United 
Slates  for  the  purpose  of  its  business,  and  save  and  e\ce[)t  such 
business  as  shall  t)e  carried  on  through  or  in  connection  with  the 
American  Company,  the  Continental  Company,  the  Ci^ar  Com- 
l)iny,  or  the  Consolidated  Com[)any  as  hereinafter  provided,  the 
iir.perial  Company  will  procure  the  follow inj,'  of  its  directors,  viz., 
:->ir  William  llenry  Wills,  Henry  Overton  Wilis,  Sir  Edward  I'avson 
\Vill>,  Sir  Frederick  Wills,  i\'cnr^it  Alfred  Wills,  Henry  Herbert 
Wills  Waller  Melville  Will:-,  Charles  Edward  Lambert,  John 
l),ine  Player,  Walter  Butler.  William  Goodacrc  Player,  and  William 
Kuddell  Clarke,  and  will  use  its  best  endeavors  to  procure  such 
other  of  its  directors  as  shall  be  rerjuired  by  the  American  Company, 
tlv  Continental  Company,  the  Cigar  Comjiany,  and  the  Consoli- 
il.ited  Company  to  enter  into  a  covenant  similar  to  that  referred  to 
ill  the  prercdint!  part  of  this  clause. 

I'l.  Forthwith,  or  as  soon  as  may  be  after  the  transfer  day,  the 
Imperial  Company  shall  duly  appoint  to  its  board  three  (3)  direc- 
tor-, nominated  by  the  Opden  Company,  subject  to  their  acquiring 
tlie  necessary  (jualitkations,  and  the  (lirectors  so  appointee!  -hall 
til  p'clected  at  the  next  ordinary  general  meeting  and  shall  be  classi- 
li'  1  -o  that  only  a  ,lue  proportion  of  them  shall  retire  in  each  v(  .r. 

17.  The  export  business  of  the  Ogden  Company  hereinbefore 
'■1  hided  from  the  operation  of  this  contract  is  to  be  the  subject 
■'-  an  agreement  entered  into  coiUemporaneously  with  this  agree- 
;ii.  rii,  anil  i)r(  viding  for  the  transfer  to  a  separate  company  of  the 
i\i>()it  business  from  the  United  Kingdom  (except  to  the  Unitvd 
States)  not  only  of  the  Ogdens  Company,  but  also  of  the  Imperial 
('"!ni)any  and  of  Salmon  &  Gluckstein,  Limited,  and  the  export 
li.i-iness  from  the  United  States  of  the  American  Comp;'ny,  the 
Ciintinental  Company,  and  the  Cigar  Company  (except  to  the 
United  Kingdom),  which  agre  "nent  has  been  already  [)repare(l  and 
i- executed  contemporaneouslj  with  this  .agreement.  For  the  f)ur- 
pi  (•  of  construing  thi.i  agreement  the  export  business  of  the  said 
-i-\iral  companies  shall  bt  deemed  to  be  herein  defined  in  the  same 
manner  as  in  the  said  cuntemporaneou'-  agreement.  The  "United 
Kingdom"  and  the  "  United  States"  are  also,  respectively,  to  be 
tl'Tined  to  be  detined  as  defined  in  the  same  agreement. 

iS.  From  and  after  tin  date  of  fansfer,  subject  to  agrci  ments 
.■Iri,  dy  easting  between  the  Imperial  Company  and  its  present 


.f" 


**■{-•■')  eiBijf"^j»s 


,64  INUUSTRIAI.    CoMIilNATIONS    ANU    TRrSTS 

vrcni.    luit^er  ilu-  Imperial  Company  m.r  Salmon  &  Gluckstein, 

I  imiu' 1   -^hall  sell  or  o'nsurn  any  loV.acco  pro.lucts  to  any  person, 

a  m    o  \-o      v.nv  nilhin  the  InUed  St-tes  except  the  Amcruan 

OH;,m.v         perM,n^  or  ounpanie.  dcH.nated  by  .t    ami  on  ihe 

>     e    Imd    hi   .\nHTir;.,n  Company,  the  Continental  Company, 

n     tl  e  clar  Companv.  an.l  the  Consolidated  Company,  re.pec- 

"    Iv'lialfnot  sell  l.r  eon^i^n  any  tobacco  products  to  any  per^n, 

rn-   *>rcomnanv  in  the  Cnlted  Kingdom  except  the  In.peria  Com- 

;^v  :    a":  pJrsons  or  cnMnune.  de^i^nated  by  U,  the  n^nU.^ 

,.|n.'  that  the  American  Company  or  it.  nommees  <hau  .  e  the  suit 

cu  torn      of  the  Imperial  Company  and  ot  Salmon  .V  (.luckstem, 

nm it  H     in  the  Cni  ed  States,  and  that  the  Imperial  (  o.npany  or 

U^^i's  '^all  be  ,he  .ole  cu^tonn.  of  the  American  J  o,n,>any 

the  Continenu;  Conipanv.  an.l  the  C  i.'ar  Company  m  the  L  m  d 

Kin.nl  m.     Nnne  of  the  parties  shall  sell  any  tobacco  produc  s    o 

,  V  pers<,n    l.rm.  or  company  whom  th.^y  have  reaM.n  to  beheN 
;S  Son  the  same  to  the  territory  in  ^vhich  the  seller  ha>  agreed 
not  to  sell  such  uoods  as  herein  provided. 

0    Fo'  American  Roods  sold  to  the  Imperial  Company  or  its 
nominees  f(.r  sale  in  the  I'nited  Kin-dom  m  pursuance  of    he  prc- 
c  X  «  clau.e  the  Imperial  Company  shall  pav  the  cost  ol  manu- 
ure  and  packlnj^  of  such  goods  (but  not  mcluding  any  expense. 
Ivertisii  -^  and  sellin,.)  plus  ten  per  c.  nt   do  per  cent),  and 
Im^.o  pa;  freights,  customs  chargo  and  d.t,e.  and  ,.,r  ,o.  :> 
o    the  Imperial  Companv  and  of  Salmon  .v:  (.luckstem.  linvud. 
il     by  thin  to  the\\merican  :     '^.puny,  tlie     ontmen  a.    Com- 
panv ir  the  Ci,a,  Company,  for  sale  within  the  ^  "^ted  ^^UUe.    n 
Vmerican  Companv,  the  Continenl:d  C omi.any,  or    he  .i^ar  Lorn 
in   V    a    the  cise'inav  be,  shall  pay  the  co.t  of  the  maiuitacture 
'  ;    ■iKicki"  thereof  (but  not  including  any  expenses  ot  advertising 
;     e  1  n<'   l^lus  ten  per  cent  ( lo  per  cent),  and  slu.ll  also  pav  freights 
%r,.     .charge.,  and  duties.     In  all  cases  of  sales  under  this  dau^ 
^he  invoices  Jf  the  respective  ve.uU.s  .hall  be  ""a  land  bmding  as 
co^t.     The  Imperial  Company  shall  be  empowered  h,  the  A  lu.i  an 


Company 
brands  wi 


and  the  Continental   Comi)any 
thin  the  United  Ivingilom  for  sale 


to  maiuiKicture 


lluir 


th 


erein,  an 


.d  the  Ameri- 


can Company 
shall  be  cmpowere( 


the  Continental  Company,  and  the  Cigar  Comjuny 


1  to  manufacture  the  b.-and^  oi  t  he  Imperi 


1  Com- 


pany in  I 


he  United  States  for  sale  thertiit 


UK 


I  each  party 


■hall 


manutac 


ture  the  brand -f  the  ether  party  Ui)on  rcH-nesaitd  lorm- 


uhe  to  be  supplied  by  tb.e  other. 


In  IKKN.M  KiNAI.    Ac.  K  KliMKM'S 


165 


30.  As  early  as  practical)!^  and  subject  to  fxisting  omtracts  and 
.^hlipalions  of  the  companies  nianulacturin^  and  scllini,'  the  cigars 
and  cif?arettes  hereinafter  referred  to,  the  American  Company,  the 
Continental  Company,  and  the  Ci^ar  Comjjany  will  ajipoint  or 
procure  thj  appointment  of  the  Imperial  Company  sole  a^^ent  for 
the  sale  within  the  United  Kinj^'dt  ni  of  Havana  and  I'orlo  Rico 
ciizars  and  Havana  and  Porto  Rico  cigarettes  directly  or  indirectly 
controlled  l-v  the  Amrricaii  Company,  the  Continental  Company, 
and  the  Ci.s^ar  Company,  an-l  such  agency  shall  be  upon  the  terms 
(if  tiie  Imperial  Comj)any  reccivint;  a  net  eommi>.-.ion  of  seven  and 
one-half  per  cent  (7-'  •_>  per  cent)  apon  the  Havana  and  Porto  Rico 
prices,  respectively,  and  bein;;  allowed  three  months'  credit  for  i)ay- 
ment  of  the  invoi<  e  jirices  less  such  y-}  2  per  cent  and  the  Havana 
.md  Porto  Rico  price.-,  charcjed  the  Imi)erial  Company  shall,  from 
lime  to  time  and  at  all  times,  be  as  low  as  the  prices.  char;,'ed  bythc 
American  Company,  tlie  Continental  Company,  and  the  C.^^ar 
Company,  or  jiarties  controlled  by  them,  for  similar  cigars  and 
ci'^iarette's  sold  to  their  most-favored  cuslomer;-.  -object  only  to  the 
lAception  th;  t  if  at  any  lime  the  p.rice-^  of  <-ij,^ars  or  cigarettes  sold 
to  anv  countr\-  not  affecting  Priti-h  trade  shall  be  temporarily 
reduc'il  for  the  purposes  of  competition,  such  local  and  temporary 
reduction  is  not  to  be  taken  into  account  for  the  puqiose  of  fixing 
the  price  of  cigar>  and  cigarettes  sold  to  the  Imperi;i!  Company. 
If  and  so  far  as  the  control  of  any  other  cigar  trade  not  hereinbefore 
jirovided  for  i>  nov-  possessed  or  .>hall  be  acquired  by  the  American 
Company,  the  Continental  Company,  and  the  Cigar  Company,  or 
anv  of  th.ni,  a  siir.iiar  agency  is  to  be  given  to  the  Imjierial  Com- 
pany in  respect  thereof  The  Imperial  Comixmy  shad  not  (excejit 
to  com])lete  any  other  contract  already  made)  handii'  <;r  sell  any 
I'lher  Havana  or  Por^o  Rico  cig  'r-  and  cigarettes  than  tho.se  of  the 
.\merican  Com[)any.  the  Continental  Comi)any,  and  the  Cigar 
Companv,  for  which  the  Imperial  Company  holds  the  aforesaid 
...^•"ncy,  ami  a  similar  provision  shall  ajijily  to  any  other  cigars  or 
cigarettes  for  which  the  aforesaid  agency  may  be  hereafter  granted, 
and  ihe  Imperial  Company  >hall  u-e  its  best  elTorls  and  endeavors 
to  i)romote  and  enlarge  th'.'  sales  of  all  such  cigars  and  cigarettes 
within  the  I  nited  Kingdom,  anil  jMovided  the  Imperial  C.)mpany 
maintains  a  sal;'  of  the  Ha\ana  cigar-  or  cigarettes  included  in 
the  agency  hereinl)efore  i)ro\id<  d  for  equal  to  not  less  than  seventy- 
two  per  cent  (72  i)er  cent!  of  the  total  annual  importations  into 
th.'  I'niied  Ringilom.  dulv  l>aid,  of  ligar^  and  cigarettes  made  in 


ll 


-\\ 


i66  iNULSiRiAL  Combinations  and  Trusts 

Cuba,  the  American  Company,  and  the  Ci^.r  ^^;;"?P^"y' .^"^  J;' 
Continental  Company  shall  not  be-  .nl.tk.l  to  call  in  H"  -^  '"/ 
olSs  and  endeavors  of  the  Imperial  Company  herembe  ore  u^ 
uired-  Provulal  alicavs,  That  the  percentage  to  be  maintamed  b> 
trimperial  C:ompany  shall  be  ascertained  upon  the  average  of 
I   e  -T'S        The  Imperial  Compa-,y  shall  sell  the  agars  and  c.ga- 
re  tes  f  om  time  to  time  falling  within  the  said  agency  at  prices  no 
Ixcml  n.'  their  cost  to  the  Imperial  Company  with  the  ac  dit.on  oi 
reights  Railway  charges,  packages,  customs  ^^f-%^-\^^Z 
charge-,  and  the  said  commission  of  7-'  2  per  cent.    The  American 
C 3any,  the  Continental  Company,  an.l  the  Cigar  Com|.any  m 
no"Loiingly  supply  cigars  or  cigarettes  to  be  t--hip^ - 
indirectlv   imported   into   the   Lniled   kingdom       The  aforesaid 
n.  o  tion  of  72  per  cent  has  been  based  upon  the  belief  and  as- 
umption  that'the  parties  hereto  of  the  second,  third,    ourth,  an 
fifth  parts  or  some  or  one  of  them  control  or  will  shortly  contn. 
nl,t  iL  than  80  per  cent  of  the  aforesaid  annual  importation   and 
if  it  ^hall  hereafter  appear  that  the  pro,,ortion  thereof  actually  con- 
trolled bv  the  said  parties  is  less  than  80  per  cent,  then  in  such  ca.t 
the  said  proportion  of   72  per  cent  shall  be  correspondmgly  re- 

'^"'f'The  Imperial  Company  shall  cause  Salmon  &  Gluckstein, 
Limi'ted,  and  A.  I.  Jones  &  Company,  Limite.l  and  any  "th^^^  corn- 
nanies  firms,  or  persons  from  time  to  time  controlled  by  t  (subject 
to  the  performance  of  any  prior  contracts),  to  purchase  their  cigars 
(,l  any  brands  comprised  in  the  said  agency  thnvigh  the  Imperial 
Company  as  agent  under  the  last  preceding  claus.^^ 

^/  The  American  Company,  the  Continental   Company,  the 
Ciirar  Comi.anv.  and  the  Consoli.lated  Comi)any    together  with 
their  directors,'entering  into  the  covenant  aforesaid,  are  to  give  to 
the  Imperial  Comi.any  in  the  United  King.lom  the  full  beneiit  o 
their  good  will  and  suiM'ort.  and  on  the  other  hand  the  Imperial 
Company,  DgKiur  with  its  directors,  entering  the  covenant  at.)re- 
said,  are  to  give  the  American  Comi.any.  the  Continenta  C  ompany 
and  the  Cigar  Company  in  the  United  Slates  the  full  benel.l  o 
their  good  will  and  su])port,  and  with  a  view  to  giving  further  el- 
fect  to  the  intention  of  the  parties  as  in  this  clause  hereinbelure 
expressed  the  allottees  ..f   the  sai.l    1.500,000  ordinary  shares  ol 
the  Imperial  Companv  are  not  to  sell  ..r  transler  more  than  10  per 
cent  of  the  said  share;^  within  the  period  of  live  (5)  years  from  the 
date  uf  their  allotment,  if  and  so  long  as  the  pr  :sent  directors  ol 


1nti:rnation.m,  Acrkements 


167 


fho  Imperial  Compan)\  nr  mhik  of  them,  shall  hold  not  less  than 
3,000,000  ordinary  shares  of  the  Imperial  Company. 

2,5.  This  agreement  is  to  he  construed  and  take  effect  as  a  con- 
tract ma(ie  in  England  and  in  accordance  with  the  law  of  F'ngland, 
hut  to  the  intent  that  any  of  the  parties  may  sue  in  its  own  country. 
I'he  Imperial  Company  is  always  to  have  an  ai^'ent  for  serv^■cc  in  the 
Liiited  States,  and  each  of  them,  the  American  Company,  the  Con- 
tinental Company,  the  Cigar  Comi)any,  and  the  Consolidated  Com- 
pany, is  always  to  have  an  agent  for  service  in  England,  and  service 
of  any  such  agent  of  any  notice,  summons,  order,  Judgment,  or 
other  process  or  document  in  ros[)ect  of  this  ai  reement,  or  any  mat- 
te arising  thereout,  shall  he  deemed  to  be  good  service  on  the  party 
anjiointing  such  agent,  and  as  regards  each  of  the  said  parties 
wtiil-t  and  whenever  there  is  no  other  agent  the  following  shall  be 
ri.nsidered  to  he  the  agents  of  the  respective  parties  duly  appointed 
under  this  clause,  namely:  For  the  Imperial  Company,  Samuel 
I  ntrrmeyer,  of  New  York  City,  American  counsel  and  for  the 
American  Company,  the  Continental  Company,  the  Cigar  Com- 
pany, and  the  Consolidated  Corni)any,  Joseph  Hood,  41  Castle 
street,  Liverpool,  solicitor.  Notice  of  any  appointment  under  this 
clause  shall  he  from  time  to  time  given  by  the  appointor  to  the 
other  parties  hereto.  The  mode  of  service  sanctioned  by  this 
clause  is  not  in  any  way  to  prejudice  or  preclude  any  "mode 
if  service  which  would  be  allowable  if  this  clause  were 
ninilted. 

:4.  So  far  as  it  is  necessary  for  the  purpose  of  making  the  issue  of 
ordinary  shares  hereinbefore  mentioned  the  Imperial  Company 
shall  forthwith  take  the  necessary  steps  for  increasing  its  capital  by 
the  creation  in  an  adecjuate  number  of  ordinary  shares  (half  pre- 
ferred and  half  deferred)  which  shall  rank  pari  passu  with  and  shall 
he  of  the  same  respective  classes  and  confer  the  same  rights  and 
lirivilcges  as  the  5,000,000  preferred  ordinary  shares,  and  the 
vOoo,ooo  def(?rred  ordinary  shares  forming  part  of  the  original 
(iiiital  of  the  Imperial  Company. 

In  witness  whereof  the  said  parties  of  the  first,  second,  sixth,  and 
.Hvi  nth  parts  have  hereunto  affixed  their  common  seals,  and  the 
Slid  parties  of  the  third,  fourth,  and  fifth  parts  have  executed  this 
auTcement  under  the  h;'nd  of  their  respective  presidents  the  day  and 
year  first  above  written. 


;1 


(Signatures). 


MICROCOPY    RESOLUTION    TEST    ChftRT 

ANSI  ur-,d  ISO   lESI   CHART  No    2 


1.0 


I.I 


1.25 


•^  l£     12.2 


13.6 


1.4 


2.0 


1.8 


1.6 


^     /APPLIED  irvHGE     Inc 


i6S 


Industrial  ('jMiUNArioNs   \nd  Trlsts 


KXIIIBIT    2 

AC.RKKMKM  MAI)!.  lU-.TWHIN  IIIK  AMKRKAN  TOBACCO  COMPANY 
INTERP'.STS  \\i)  liu;  IMI'KKIAL  TOIiACCO  COMPANY,  LIMITKD,  REL- 
ATIVE TO  Till  (ONTROI,  OV  BUSINESS  BY  TIU.  BRl  H>iI-A.MKRI(\N 
TOBACCO  COMPANY.  LIMITED  ' 

An  agreement  made  tlie  twenty-seventh  cLiv  of  Sej)t(nil)er,  one 
thousand  nine  hundred  and  two.  between  The  Imjjerial  Tobacco 
Comi)any  (of  Great  Britain  and  Ireland).  Limited,  beinp;  an  Enj^- 
lish  company  duly  incorporated  under  Kne;lish  law  (hereinafter 
referred  to  as  the  "Imperial  Company"),  of  the  first  part;  Of,'den's 
Limited,  also  bein<i  a  company  incorjjorated  under  Kiifjlish  law 
(hereinafter  referred  to  as  the  "Ofjden  Company"),  of  the  second 
[)art;  The  American  Toi)acco  Company,  a  corporation  orfjanized 
and  existing  under  and  by  virtue  of  the  laws  of  tlie  State  of  .New 
Jersey,  one  of  the  States  of  the  United  States  of  America  (In  re- 
inafter  referred  to  as  the  "American  Company"),  of  the  tlun' 
part;  Ci)ntinenlal  Tobacco  Company,  a  C(ir])oralioii  organized  and 
existing  under  and  by  virtue  of  the  laws  of  the  said  Stale  of  New 
JtT-^ey  (hereinalter  referred  to  as  the  "Continental  Company"), 
of  tlio  fourth  part:  .Xmerican  Cigar  Company,  a  corporation  or- 
ganized and  existing  under  and  by  virtae  of  the  laws  of  the  said 
Slate  of  New  Jt  rsey  (hereinafter  referrid  to  as  the  "Cigar  Com- 
pany"), of  the  fifth  ixirt;  Consolidated  Tobacco  Company,  a  cor- 
poration organized  and  existing  uiukr  and  by  virtue  of  the  laws 
of  the  said  State  of  New  Jer'-ey  (hereinaftiT  referred  to  as  the 
"Consolidated  Company"),  of  tlu  -ixth  jnirt;  and  Williamson 
\Vliit(hrad  Fuller  and  James  In>kip,  on  behalf  of  a  comjjany  in- 
ti  i!.|i(l  lo  he  formed  under  the  companies'  acts,  iiS62  to  igoo,  with 
the  iKime  of  "  H'iti-h-American  Tobacco  Companv,  Limited" 
(hereinafter  reierrtd  to  as  the  "British-American  Company"), 
of  the  -eventh  |iart. 

Whereas  the  jjarties  hereto  of  the  first  five  parts  now  res])oc- 
tively  carry  on  busiiu'ss  as  tobacco  manufacturers  and  other  an- 
cillary businesses,  which  comprise  as  to  the  i)arties  hereto  of  the 
first  and  second  parts,  l)usinesses  carried  on  within  the  United 
Kingdom  of  Great  Britain  and  Ireland  and  export  businesses  as 
hereinafter  defined,  and  as  lo  the  parlies  hereto  of  the  third,  fourth, 

'  Rfpnrt  of  the  Commissioner  of  CoriMjralions  on  the  Toli.mu  Industry, 
Exhibit  .No.  2,  I'url  1,  pp.  440  IT. 


Tntkr.natioxai,  Agreement:: 


1 6') 


ami  hl'th  iwrts,  hu^iIn.■s^es  carried  on  witliin  tlio  I'nilcci  States  <>t 
America,  and  export  l)usinesses  as  also  hereinafter  defined,  and 
proposals  have  been  made  for  ama!pamatin,ti  the  said  e.\i)ort  husi- 
ncsses  by  transfer  thereof  to  the  British-American  Company  upon 
the  terms  and  conditions  hereinafter  expressed. 

Xow  therefore  it  is  hereby  agreed  as  follows: 

I.  In  this  af,'reement  the  words  "United  Kingdom"  mean  Great 
Britain  and  Ireland  and  the  Isle  of  Man. 

The  words  "United  States'"  mean  the  United  States  of  .\merica 
as  now  constituted— Cuba,  I'orto  !\iro.  the  Hawaiian  Ishmd-,  and 
the  I'hilii)i)ine  Islands. 

The  words  ''export  business"  mean  the  manufacture  of  and 
draliiiK  in  lobacco  and  its  ])ro(Iuct>  in  any  country  or  pla  e  outside 
the  United  Kingdom  and  the  Unitid  States  and  the  manufaciure 
of  and  dealing  in  tol)acco  and  it,-  [imducts  witliin  the  United  King- 
dom for  export  to  any  other  country  except  the  United  States,  and 
the  manufacture  of  and  dealing  in  tobacco  and  its  pnuiucts  in  tin- 
United  States  (except  in  Cnha,  Porto  Rico,  the  Hawaiian  Islands, 
and  the  Philiiipine  Islanils)  for  the  puri)o>e  of  export  to  any  other 
country  e.xccjjt  the  United  Kingdom,  and  tlse  manufacture  and 
selling  in  the  United  Kingdom  and  the  United  States,  resiu'ctively, 
of  toliacco  to  be  supplied  to  ships  in  port  for  the  purpose  of  ships' 
stores. 

:.  The  parties  hereto  of  the  first  five  parts  shall  sell  and  the 
Briti-h-.\merican  Company  shall  purchase  the  export  bu^ines-es 
as  hereinbefore  delined  of  the  parties  of  the  hrst  tivi'  parts,  and  the 
good  will  ap[)ertaining  thereto,  which  <hall  include  formula-  .ind 
recipes  of  {)reparation,  trratmeiit.  aii<l  manufacture,  as  well  ,i^ 
license  to  u.se  patent  rights,  tra<le-marks,  brands,  licenses,  and 
other  exclusive  rights  and  ])rivilege-.  for  the  ])urposi'  of  such  ex- 
port business,  and  -hall  .il-o  include  all  stoik  or  -hari's  in  com- 
panies incorr orated  in  countries  foreign  to  the  Inited  Kingdom 
and  the  Inited  States  owned  or  held  by  the  jiartits  of  the  tirst 
six  parts,  including  all  shares  of  th'  .Vmerican  Comp.mv  in  C.eorg 
.•\.  Jasmat/.i  Company  fof  Dre^dt-n),  and  all  shares  of  the  Im- 
perial Company  in  W.  D  iS.  11,  (),  WilK  'Australia^.  Limited,  at 
the  price  of  two  million  eight  liutidred  and  twenty  thousand  pounds 
(  l'2,Sjo,ooo\  of  which  two  equal  third  i)arts,  or  one  million  eight 
hundred  and  eighty  thousand  pounds  (I' 1,880,000),  shall  be  pay- 
al)ie  to  the  Oiiden  C..miiany,  the  .\nierican  Company,  the  Conti- 
nental   Company,    the   Cigar   Com[)any,   and    the   Consolidated 


'.mm^^   :<: 


1^1 


hi 


170 


Industrial  Combinations  and  Trusts 


Company,  or  some  of  Ihem,  in  such  i)roporti<ins  as  they  shall  mu- 
tually agree  and  as  shall  he  indicated  in  writing  under  the  hands 
of  their  respective  [)re>idents  or  chairmen  as  the  case  may  be,  and 
one-thiril,  or  nine  hundred  and  forty  thousand  [)ounds  ( l"o4o,ooo), 
shall  1.0  payable  to  the  Imjierial  Company,  and  the  said  prices 
shall  be  satistied  by  the  allotment  to  the  parties  entitled  thereto 
of  fully  paid-up  ordinary  shares  in  the  British-American  Company 
to  be  treated  as  of  par  value.  The  said  sale  and  purchase  shall 
take  eflect  as  to  the  Ogden  Company  on  the  ^oth  September, 
IQ02  (hereinafter  referred  to  as  "the  Ogden  transfer  day"),  and 
as  to  the  parties  hereto  of  the  lirst.  third,  fourth,  fifth,  and  sixth 
parts  on  the  ,ust  Octobc,  1902  (hereinafter  referred  to  as  "the 
Imperial  and  American  tn'nsfer  day"). 

,V  In  addition  to  the  ordinary  shares  by  the  preceding  paragraph 
agreed  to  be  allotted  in  p.  _,ment  of  the 'said  [Hirchase' money,  the 
Imperial  Comiiany  shall  lake  and  pay  cash  for  three  hundred 
thousand  (,:;oo,ooo)  addilion.d,  one-[)ound  ordinary  shares,  and  the 
American  Company,  the  Continental  Company, 'the  Cigar  Com- 
pany, and  the  Consolidated  Company,  or  some  or  one^jf  them 
shall  take  and  pay  ca,->h  for  six  hund'red  thousand  (000,000)  ad- 
ditional one-pound  ordinary  shares  in  the  Briti>h-American  Com- 
pany, Limited,  and  such  shares  shall  be  alioted  to  such  parties  at 
once. 

4.  The  Imperial  Company  and  the  Ogden  Company  will,  re- 
spectivel>-,  sell  to  the  Hriti>h-.\merican  Company  their  several 
lands,  buildings,  and  hereditaments  u>ed  as  export  factories,  and 
the  j.lant  and  efjuijjment  and  stock  in  trade  at  the  date  of  tian-^fer 
formingapart  of  the  said  export  businesses  or  undertakings,  and 
the  American  Company,  the  Continental  Company,  and  the  (^igar 
Company  will  sell  to  the  I{riti~h-Americ;in  Comp.'iny  factories  for 
e\[)ort  business  and  the  plant  and  erjuipment  and  stdck  in  trade  at 
the  date  of  transfer  forming  a  part  of  the  said  export  businesses 
or  undertakings.  The  factories  of  the  said  resi.ecfive  {Kirties  em- 
ployed for  export  purposes  shall,  in  the  case  of  the  Imperial  Com- 
pany, include  the  (  \port  factory  of  the  Imperial  Comi)any  formerly 
belonging  t.,  W.  1).  ^  H.  O.  Wills,  Limited,  at  Ashton  Gate  Bris- 
tol, and  the  land  and  cottages  held  therewith;  the  le.isehold  exiiort 
factory  formerly  l)elonL,'ing  to  Messrs.  Lambert  &  Butler,  Limited 
in  London;  and  the  two  exjx.rt  factories  formerly  belonging  ul 
the  Kichmond  Caycndish  Company,  Limit. d,  .it  Liyerfn.r.i-  and 
the  cigarette  factory  of  the  Imperial  Company  tnrmerly  belonging 


International  Agreements 


171 


to  VV.  D.  &  H.  O.  Wills,  Limited,  at  Sydney,  in  the  Commonweaitii 
01  Australia.  Trie  export  factories  of  the  O^den  Company  will 
include  the  bonded  or  export  factory  of  the  Ogden  Company  in 
Cornwallis  street,  Liverpool,  and  a  factory  at  Sydney  aforesaid. 
Ihe  export  factories  of  the  American  Company,  the  Continental 
Conipany,  and  the  Ci^ar  Company  will  include  such  suitable  fac- 
tories as  shall  be  designated  by  thes,  companies,  or  some  or  one  of 
them,  so  that  the  price  thereof  with  tht  ir  plant  and  e(iui[)nient  as 
hereinafter  fixed  shall  not  exceed  the  aggregate  [)rice  of  the  fac- 
tories, land,  and  cottages  with  their  plant  and  ef|uipmcnt  to  be 
sold  by  the  Imperial  Company  as  before  slated.  All  the  .said  fac- 
tories and  the  plant  and  equipment  used  in  connection  with  the 
same  are  to  be  taken  at  the  value  now  standing  in  the  books  of  the 
resi)ective  vendors  thereof,  and  the  stock  in  trade  and  materials 
hereby  agreed  to  be  sold  are  to  be  taken  at  cost.  The  respective 
values  shall  be  j)aid  by  the  British-American  Companv  to  the 
respective  vendors  in  cash.  As  part  of  the  export  business  and  good 
will  to  be  sold  by  the  Imperial  Comiwny  to  the  Briti.di-Americau 
Company  the  export  business  of  Salmon  &  Gluckstein,  Limited, 
shall  be  included,  and  the  Imperial  Company  hereby  undertakes 
to  procure  the  transfer  of  the  same  to  the  British-American  Com- 
pany, but  this  shall  not  i)e  deemed  to  ini  lude  any  lands,  buildings, 
or  hereditaments.  The  said  export  business  shall  also  include  all 
the  interest  of  the  Imperial  Company  in  a  factory  at  Shanghai 
recently  purchased  by  it  and  or  in  the  American  Cigarette  Com- 
pany of  Shanghai. 

5.  The  Hriti>h-.\merican  Company  shall  be  entitled  to  [jurchase 
at  not  exceeding  co^-t  thereof  to  its  vendor  any  export  business 
In  reafter  ac(iuired  by  any  of  the  parties  hereto  of  the  lirst  six  jjarts, 
.i>  well  as  any  shades  in  any  comjianies  inc<ir[)orati'd  in  countries 
foreign  to  the  United  Kingdom  and  the  United  States  acquired 
by  any  of  said  parties,  ;ind  the  e.<port  business  and  the  assets  .  m- 
ployed  in  such  business  of  any  comiiany  the  control  of  whidi  shall 
be  hereafter  acquired  by  any  of  said  i)arlies,  as  well  as  any  shares 
in  companies  eigaged  in  export  business  which  may  be  held  by 
such  controlled  companies  acquired  by  any  of  the  parties  of  the 
lirst  six  parts  as  aforesaid. 

6.  The  British-. \mirican  Comjiany  shall  li;nf  the  right  to  use 
in  its  exj)ort  business,  as  hereinbefore  detnied,  any  br.iiid-^  and 
trade-marks  now  owned  nr  hereafter  acciuired  or  adopted  by  any 
of  the  partie-^  lun  to  oi  the  lirst  six  parts. 


172 


Industrial  Combi nations  and  Trusts 


7.  Tbe  sale  and  purchase  of  the  said  export  business  hereinbe- 
fore aj,'reed  to  be  made  are  sulijeet  to  and  with  the  Ijenelit  of  all 
contracts  heretofore  made  by  the  respective  parties  hereto  of  the 
first  six  parts,  with  their  agents  or  other  persons  interested  in  the 
said  Inisinesses  so  far  as  such  contracts  are  now  in  force,  save  and 
except  that  if  the  liniicrial  Company  is  under  an  obligation  to 
buy  the  shares  of  (i.  I",  nuiman  in  \V.  1).  &  II.  O.  \Vill>  fAustralia), 
Limited,  at  any  price  not  approved  by  the  lirilish-American  Com- 
pany, such  obligation  is  not  agreed  to  be  undertaken  liy  that  com- 
pany. The  Japanese  stockholders  in  Murai  Bros.  Comi)any, 
Limited,  shall  have  the  right  to  take  from  the  Ikitish-.\meri(  an 
Con:i)any  on  or  before  January  i,  u;o4.  by  paying  par  therefor, 
with  interest  thereon  at  the  rate  of  six  i)er  cent  per  annum  (less 
any  dividends  received)  from  the  dale  of  their  purchase  bv  th.e 
.\merican  Company  until  payment,  all  issued  stock  sold  by  the 
Amer '-an  Company  to  the  British-American  Company  in  excess 
of  sixty  percent  of  the  total  ca[)ilal  stock  of  .Murai  Bros.' Company, 
Limited. 

S.  The  dividends  or  proportion  of  dividends  upon  shares  hereby 
agreed  to  be  sold  and  the  f)rotits  of  each  export  business  hereby 
agreed  to  be  sold  shall,  uj)  to  the  respective  transfer  days,  belong 
to  the  respective  vendors  of  the  sanu'. 

(^  The  parties  of  the  lir>t  live  parts  shall,  respectively,  clear  the 
lands,  buildings,  and  hereditaments  heri'by  agreed  to  be  sold  o{ 
all  mortgages,  charge^,  and  other  incumljrances,  and  shall  lie  en- 
tilletl  to  the  proceeds  of  all  book  debts  due  to  the  said  parties. 
res])ectively,on  the  respective  transfer  days,  but  for  a  ])eriodof  three 
caliMidar  months  thereafter  the  Briti>h-American  (."ompany  shall  be 
authorized  on  behalf  of  these  respectiv<'  i)arties  to  collect  and  re- 
ceive such  book  debt-,  and  the  liroceed-  -liall  be  from  time  to  time 
jiaid  over  to  the  parties  entitled  thereto  at  the  end  of  e\ery 
month. 

10.  The  British-American  Comi)any  -hall  undertake  the  ob- 
servance and  performance  of  all  covenant>  and  conditions  on  the 
l)ail  of  the  lessee  or  tenant  in  any  lease  of  or  agreement  relating 
to  the  lands,  buildings,  and  hereditaments  hereby  agri'cd  to  be 
sold,  and  thenceforth  on  the  part  of  the  lessee  or  tenant  to  be  ob- 
served .ind  jurformid.  and  the  i5ritish-.\merican  Company  shall 
also,  as  fr(>m  the  same  date,  undertake  the  performance  of  all  con- 
tracts bona  tide  entered  into  ]',y  the  parties  of  the  first  tive  parts 
in   the  (ordinary  cour-t'  of  carryiiig  on  lluir  exjiorl   busine-s  and 


Internatii'ixai.  Agrkf.mexts 


particularly  applicable  thereto,  and  shall  indemnify  the  parties 
of  the  first  five  parts  against  all  proceedings,  clain-.s/and  demand^: 
in  respect  thereof. 

11.  All  books  of  account  of  the  parties  of  the  first  and  second 
parts  referring  solely  to  the  export  businesses  hereby  agreed  to  be 
sold,  and  all  books  of  reference  to  customers  and  other  books  and 
documents  of  the  said  parties  relating  solely  to  the  said  export  busi- 
nesses (e\eei)t  the  statutory  and  minute  books,  and  any  other  lx))ks 
of  a  [)rivate  nature)  shall  be  flelivered  to  the  Ikitish-.Vmerican  Com- 
pany upon  completion  of  the  purchase,  and  tlie  Ikiti>h-American 
Company  shall  thenceforth  be  entitled  to  the  custody  thereof  and 
to  the  use  thereof  for  the  purpose  of  carrying  on  its  business,  but, 
nevertheless,  the  parties  of  the  first  and  second  jiarts  shall  have  free 
access  at  all  reasonable  times  to  the  said  books  and  documents, 
or  any  of  them,  for  any  reasonable  purpose,  and  to  the  temporary 
use  of  the  same  for  the  purpose  of  any  legal  proceedings.  The 
parties  of  the  third,  fourth,  and  fifth  parts  shall  deliver  to  the 
British-American  Company  a  list  of  their  respective  customers 
for  the  exjwrt  businr-ses  hereby  sold  and  any  books  used  exclusively 
in  connection  with  such  business. 

12.  The  Hriti.-h-.\merican  Company  shall  from  the  time  of  any 
property  being  at  its  ri>k  be  entitled  to  the  benefit  of  all  current 
insurances,  and  the  parties  of  the  t'lrst  five  parts  sliall  be  entitled 
to  rejiayment  of  a  ]iroportionate  jxirt  of  the  premiums  already  paid 
for  the  unexpired  portion  of  the  current  year  of  any  policv,  and  all 
periodical  payments  >hall  be  ajiportioned  as  from  the  respective 
transfer  days  hereinbefore  mentinned. 

I  V  flic  purchases  sh.all  be  comi)leted  on  or  before  the  ist  day 
of  January,  iqo^,  in  Ldudon,  and  the  consideration  for  the  same 
shall  be  paid  or  satisfied  subject  to  the  pro\  i^ions  of  this  agree.iient 
and  thereupdu  .ind  from  time  to  time  tlie  parties  of  the  t'lrst  ti\e 
jKirt^  shall  execute  and  do  all  such  as.-urances  and  things  for  vesting 
the  said  premises  in  the  l!ritish-.\merican  Company  and  giving  to 
it  the  lull  beiiel'it  of  this  agreement  as  sliall  be  reasonably  required. 

14.  .\--  regards  any  of  the  premises  subject  to  mortg;;ges  which 
(an  not  be  paid  olT  until  after  the  time  of  completion,  tlie  parties 
of  the  first  five  parts  shall,  if  so  desired  by  the  Hritish-American 
Company,  convey  the  .-aid  premises  subject  to  the  mortgages  affect- 
ing the  same,  resi)ectively,  and  the  British-American  Company 
shall  retain  out  of  the  consideration  alore.-^aid  a  sum  sufficient  to 
pay  otT  and  satisfy  the  claims  under  such  mortgage. 


174 


iNDLSTRiAL    COMBINATION'S    AND   TRUSTS 


15.  In  iiny  and  every  case  where  any  leaseholds  hereby  agreed 
to  be  sold,  are  only  assignable  with  the  consent  of  the  landlords 
from  whom  the  same  respectively  are  held,  the  parties  of  the  I'lrsl 
five  parts,  or  such  of  them  as  hold  such  leaseholds,  shall  use  their 
best  endeavors  to  obtain  the  requisite  consent  for  the  assignment 
to  the  British-American  Company,  and  in  any  case  where  such 
consent  can  not  be  conveniently  obtained  the  [)arties  of  the  first 
fi\e  parts  t)r  such  of  them  as  hold  such  lea.>eho!ds  as  aforesaid  shall 
execute  a  declaration  of  trust  in  favo,-  of  the  British-American 
Company,  or  otherwise  deal  with  the  same  as  the  British-American 
Conijiany  shall  direct. 

16.  The  possession  of  the  property  hereby  agreed  lo  be  sold  by 
the  Ogden  Company  shall  be  delivered  to  the  British-American 
Company  on  the  Ogden  transfer  day,  and  the  possession  of  the 
properties  hereby  agreed  to  be  sold  by  the  parties  hereto  of  the 
!ir<.t,  third,  fourth,  and  lifth  })arts  shall,  subject  as  hereinafter 
mentioned,  be  delivered  to  the  British-American  Company  on  the 
Imperial  and  American  transfer  day,  but  if  the  said  [Kirties  of  the 
third,  fourth,  and  fifth  parts  shall  not  be  able  to  deliver  po-^.-ession 
on  the  last-mentioned  transfer  day,  the  said  p)arties  shall  from  f-uch 
day  until  delivery  of  possession  carry  on  and  conduct  their  export 
business  for  the  benefit  of  the  British-American  Comjjany,  and 
shall  account  to  tliat  company  for  all  the  profits  arising  therefrom, 
but  the  Briti>h-American  Company  shall  jxiy  interot  at  the  rate 
of  I'lvc  per  cent  per  annum  on  the  purchase  money  from  the  transfer 
day  until  actual  payment. 

17.  For  the  puqioves  (ji  title  of  the  lands,  buildings,  and  heredit- 
aments hereby  agreed  to  be  sold  by  the  parties  of  the  first  and 
second  part<,  they  shall,  respectively,  be  deemed  and  taken  to  have 
entered  into  this  contract  with  the  Hritish-.\merican  Company  sub- 
ject to  the  terms  and  stipr'ations  of  the  Liverj)ool  jiublic  sale  condi- 
tions so  far  as  the  same  >hall  be  applicable  to  a  sale  liyprivate  treaty. 

18.  Each  of  the  parties  hereto  of  the  fir-t  >i\  parts  hereby  agrees 
and  shall  covenant  with  the  Iiriti>h-American  Company  that  the 
said  covenanting  party  will  not  at  any  time  after  its  transfer  day, 
either  solely  or  jointly  with  any  other  person,  company,  or  firm, 
directly  or  indirectly,  carry  on  or  be  employed,  engaged,  or  con- 
cerned or  interested  in  export  business  as  defined  in  this  agree- 
ment, excej)l  as  it  may  be  interested  as  a  member  of  the  Hritish- 
.Vmerican  Coni|)any  or  of  a  coini)any  formed  or  to  be  formed  with 
th.e  concurrence  of  the  Hi  iti-li-;\merican  Company,  and  al^-o  except 


Internatioxal  Agreement: 


/:> 


so  far  as  the  parties  of  the  third,  fourth,  filth,  and  sixth  part^  may 
be  interested  as  members  of  companies  or  firms  engaged  in  export- 
ing cigars  and  cigarettes  from  Cuba,  Porto  Rico,  the  Hawaiian 
Islands,  and  or  the  Philippine  Islands,  and  the  British  American 
Company  hereby  agrees  and  shall  on-enant  with  each  of  the  parties 
hrret.)  uf  the  iirst  .-ix  parts  that  the  British-American  Company 


II  ni.t  at  any  time  hereafter,  either  solely  or  jointly  with  any 
ler  person,  firm,  or  company,  directly  or  indirectly,  carry  on  or 


will 
ot 

l)e  employed,  engaged,  concerned,  or  interested  in  the  business  of 
a  tobacco  manufacturer  or  in  any  (Jealing  in  r  jbacco  or  its  products 
except  in  the  manner  and  within  the  limits  contemplated  and 
authorized  by  this  agreement. 

19.  The  British-American  Company  will,  if  and  so  long  as  there- 
unto required  l>y  the  Imperial  Company,  manufacture  in  the  United 
Kingdom  such  brands  as  the  Imperial  Company  shall  require  for 
•^ale  in  the  United  Kingdom  and  for  export  to  the  Uniteil  States, 
to  be  manufactured  in  bond,  and  the  Imperial  Comi)any  shall  i)ay 
for  tobacco  manufactured  pursuant  to  this  clause  the  cost  of  man- 
facturing  and  packing,  with  an  addition  of  10  per  cent  upon  such 
cost,  and  the  Imperial  Company  shall  also  pay  the  duty. 

JO.  This  agreement  is  to  be  construed  and  take  elTcct  as  a  Cv)n- 
tract  made  in  England  and  in  accordance  with  the  law  of  England; 
but  to  the  intent  that  any  of  the  parties  may  sue  in  its  own  country' 
the  Imi)erial  Company  is  always  to  have  an  agent  for  service  in 
the  United  States,  and  each  of  them,  the  American  Company,  the 
Continental  Company,  the  Cigar  Company,  and  the  Consolidated 
Company,  is  always  to  have  an  agent  for  service  in  England,  and 
SLTvice  on  any  such  agent  of  anv  notice,  summons,  order,  judg- 
nunt.  or  other  process  or  document  in  respect  of  this  agreement, 
or  any  matter  ariM'ng  thereout,  shall  be  deemed  to  be  good  service 
on  the  party  ai)pointing  such  agent;  and  as  regards  each  of  the 
said  parties  whilst  and  whenever  there  is  no  other  agent  the  fol- 
lowing shall  be  considered  to  be  tne  agents  of  the  respective  parties 
duly  afjpointed  under  this  clause,  namely:  For  the  Imperial  Com- 
pany, Samuel  Untermeyer,  of  New  York  City,  American  counsel, 
and  for  the  American  Company,  the  Continental  Company,  the 
Cigar  Company,  and  the  Consolidated  Company,  Joseph  Hood, 
41  Casile  Street.  Liverpool,  solicitor.  Notice  of  any  appointment 
under  this  clause  shall  be  from  time  to  timt^  given  by  the  ap- 
Itointer  to  the  other  parties  hereto.  The  mo^.  of  service  sanc- 
tioned by  this  clause  is  not  in  any  way  to  prejudice  or  preclude 


176 


iNOt'STRlAL    COMBINATIOXS    AND   TRUSTS 


any  mcxle  of  service  which  would  he  allow^ihle  if  this  clause  were 
omitted. 

21.  The  vali(hty  of  tliis  a,ij;reement  is  not  to  he  impeached  on  the 
grtjund  that  'he  vendor-,  a>  promoters  or  otlierwi>e,  stand  in  a 
hduciarv  relationship  to  the  Ikitish-American  Company,  and  that 
the  directors  thereof  beint:  interested  in  the  vendors'  businesses  do 
not  constitute  an  independent  board.  V\um  the  adoi)tion  hereof 
by  the  British-American  Conipany  in  such  a  manner  as  to  render 
the  same  binding  on  that  company  in  favour  of  the  vendors,  the 
said  Williamson  Whitehead  Fuller  anil  James  Inskip  shall  be  dis- 
charged from  all  liability  hereunder. 

2  2.  The  cost  of  and  incidental  to  the  formation  and  registration 
of  the  British-American  Company  shall  be  borne  by  that  company. 

In  witness  whereof  the  said  parties  of  the  first,  second,  and  third 
parts  have  hereunto  affixed  their  common  seals,  and  the  said  parties 
of  the  fourth,  fifth  anil  sixth  jxirts  have  executed  this  agreement 
under  the  hand  of  their  respective  presidents,  and  the  parties  of 
the  seventh  part  have  hereunto  subscribed  their  names  the  day  and 
year  first  belure  written. 

(Signatures.) 

ExHIiUT    3 
INTERNATIUXAL    .\GRi;i.Mi:NT    IN    TIIi:    F.XPT.OSIVES   TRADK  ' 

Ac.RKKMi-.NT  made  this  2(Ah  day  of  October,  iSgy,  between: 
Messrs.  E.  I.  Dr  Pont  im  Xkmui'ks  &;  Co.,  of  Wilmington,  Del,; 
Laflin  and  Rand  Powdkr  Company,  of  Xew  York  City; 
Eastern  Dyn.^mite  Company,  of  Wilmington,  Del.; 
Thk  Mumi  Powder  Company,  of  Xenia,  Ohio; 
The  Amekkan  Powder  Mills,  of  Boston,  Mass.; 
The  Aetna  Powder  Company,  of  Chicago,  111.; 
The  Austin  Powder  Company,  of  Cleveland,  Ohio; 
The  California  Powder  Works,  of  San  Francisco,  Cal. ; 
The  Giant  Powdir  Company,  Consolidated,  of  San  Francisco, 

Cal.; 
The  Judson  Dynamite  and  Powder  Company,  of  San  Fran- 
cisco, Cab; 
(hereinafter  co!lecti\ely  referred  to  as  "the  American  Factories") 
of  the  one  part,  and 

'  Uuilid  SUte-:  of  Anhrua.  v.  /■;.  /.  Ju  Pmit  de  Xnnoiirs  L"  Co.  Governmcnl'd 
Kxhibil  Nu.  iig,  Pel.  Kcc.  E.'chibiB,  Vol.  ii,  pp.  luj  U. 


S 


International  AoRrrMFNTS 


177 


The    Vereinigte    Koln-Rottweiler    I'l  i  \i  riahrikin,    of 

Coldfjnt'; 

The  Xobee-Dynamite  Trust  Company.  Limitki),  of  London; 
(hereinafter  collectively  referred  to  as  '■the  European  Factories") 
of  the  other  part. 

Whereas  the  parties  hereto  own  or  control  a  Jarm.-  number  of 
(ompanies  and  works  enf;;a£;e<l  in  the  manufacture  and  trade  of 
explosives,  and  whereas  it  has  been  deemed  advisable  to  make 
arrangements,  so  as  to  avoid  anything  being  done  which  would 
atTect  injuriously  the  common  interest. 


It  Has  Therefore  p.i.en  Agreed  as  Foli 


ows: 


I 


I.  The  word  "Explosives"  in  this  Agreement  is  to  lie  under- 
stood as  including  detonators,  black  powder,  smokeless  sporting 
liowder,  smokeless  military  powder,  and  high  explosives  of  all  kinds. 

:.  A  list  of  all  the  companies  and  factories  controlled  by  the 
American  Factories  directly  or  indirectly  is  to  be  prejjared  and 
handed  by  Messrs  E.  I.  Du  Pont  de  Nemours  &  Co.,  in  duplicate 
to  the  P^uropean  Factories  at  the  time  of  the  execution  of  this 
au'reement,  and  the  European  Factories  are  to  hand  to  Messrs. 
Iv  I.  Du  Pont  de  Nemours  &  Co.  a  complete  list  of  the  Companies 
ccn.lroUcd  by  them  directly  or  indirectly  when  executing  this  Agree- 
ment. Should  the  [jcriod  of  control  which  any  of  the  parties  have 
oyer  any  comi)any  or  factory  be  lixed  by  contract  for  a  shorter 
time  than  the  duration  of  this  present  Agreement,  that  fact  shall 
be  stated  on  such  list,  and  it  is  understood  that  in  the  event  of 
any  renewal  of  such  arrangement  in  such  a  manner  as  to  extend 
llie  control  over  the  period  of  the  present  Agreement,  the  Com- 
panies in  question  shall  be  bound  to  adhere  to  the  term<  hereof. 

The  American  Factories  and  the  European  l"ai  lories  shall  be 
Ijuund  to  stij)ulate  adherence  to  the  present  Agreement  on  the 
part  of  all  and  any  Companies  or  Factories  over  which  they  now 
have  control  or  may  directly  or  indirectly  obtain  control  during 
the  continuance  of  th.is  .Agreement. 

3.  Regarding  Detonators  it  is  agreed  that  the  lluropean  Fac- 
tories shall  abstain  from  erecting  detonator  works  in  the  United 
States  of  North  .\merica.  The  works  whii  h  are  buildint^  at  James- 
burg,  .New  Jersey,  are  not  to  be  completed,  and  the  whole  scheme 
as  worked  out  by  Mr.  Miiller  is  to  be  abandoned.  .1  consideration 
of  tliis  scheme  being  abandoned  and  the  erection  of  the  works  being 


.78 


In'DUSTKIAI.    CdMBIX ATIOXS    AM)    TrTSTS 


st<Ji)i)c<l.  the  American  lactorics  undertake  to  bear  all  expenses 
hitJKTlo  incurred  in  connection  thcrjwith,  and  they  will,  more- 
over, (Jischarf^e  the  ohlitjations  which  Mr.  Muller  has  untlertaken 
in  connection  with  the  aljove-menlioned  scheme,  with  regard  to 
which  obligations  a  special  subsidiary  Agreement  is  to  be  made. 
And  it  is  moreover  agreed  that  the  American  Factories  shall  order 
and  take  from  the  Kuropean  Factories,  /.  r.,  from  The  Rhenish 
Westphah'an  .Sprengstoff  A.  G.  every  year  5,000,000  hetonatt^rs 
at  the  fdllowiiig  prices,  vi/.:  —  .M.  1 1  I'ur  No.  3,  M.  i  j  for  N'o.  :;  rim, 
M.  I :;  for  .\o.  4.  .M.  i  v^o  for  Xo.  5,  M.  16,50  for  No.  5  rim,  .M,  20 
for  Xo,  (),  and  .M.  j  i  for  .Xo.  0  rim.  all  these  prices  to  be  under.'-tood 
per  1,000  e.\  ship  Xew  'N'ork  without  duty, 

4.  As  regards  J31ack  Powder  the  .Vmerican  Factories  bind  them- 
selves not  to  erect  factories  in  Europe,  and  the  European  Factories 
bind  themselves  not  to  erect  factories  in  the  United  States  of 
America.  Both  parties,  however,  are  to  be  free  to  import  into  the 
other  party's  territory. 

5,  As  regards  Smokeless  Sporting  Powder  the  American  Fac- 
tories undertake  not  to  erect  factories  in  Europe,  and  the  Euiopean 
Factories  undertake  not  to  erect  factories  in  the  United  States  of 
America;  boih  parties,  however,  are  to  be  free  to  import  into  the 
other  party's  territory. 

6.  With  regard  to  Smokeless  Military  Powder  it  is  hereby  agreed 
that  the  European  Factories  undertake  nnt  to  erect  anv  factory 
in  the  United  States  of  America,  and  th:.t  the  .\nierican  Factories 
undertake  not  to  erect  any  factories  In  Europe. 

Whenever  the  .American  Factories  receive  an  enrjuirv  for  any 
Government  other  than  their  own.  either  directly  or  indirectly, 
they  are  to  communicate  with  the  European  Factories  through  the 
Chairman  appointed,  as  hereinafter  set  forth,  and  by  that  means 
lo  ascertain  the  price  at  which  the  European  Factories  are  ([Ut^ting 
i>r  have  fixed,  and  they  shall  be  bound  not  to  quote  or  sell  at  any 
lower  figure  than  the  i)rice  at  which  the  European  Factories  are 
(]uoting  or  ha\e  ti.xed.  Should  the  European  Factories  recei\e 
an  encjuiry  from  tlio  Government  of  the  United  States  of  North 
America,  or  decide  to  quote  for  delivery  for  that  Government,  either 
directly  or  indirectly,  they  shall  first  "in  the  like  manner  ascertain 
the  price  cjuoted  or  fixed  by  the  American  Factories  and  shall  be 
bound  not  to  quote  or  sell  below  tli;a  figure. 

7,  With  regard  to  High  Explosives  (by  which  all  explosives  fired 
by  means  of  Detonators  arc  to  be  understood),  it  is  agreed  that 


wm 


Intkrn ATii  i\ Ai.  Agreements 


1?'; 


Canada  and  the  Islam!-  appcrtaininjj;  tluTcto.  as  well  as  the  .Si>anis? 
possessions  in  the  Caribbean  :»'a,  are  to  be  a  free  market  rnalTectec 


the  United  States  of  Xorth  America,  willi  lluir  present  or  future 
territories,  I'os^es-ion-,  Colonies,  or  Dependencies,  the  Republics 
of  Mexico,  Guatemala.  Honduras,  Xicaraj^ua,  ari  Costa  Rica, 
as  well  as  the  Rcput)lics  of  the  United  States  of  Columbia  and 
\'enezuela,  arc  to  be  deemed  the  exclusive  territory  of  the  American 
I'.uturies,  and  are  luTe.ifter  referred  to  as  '"American  Territory." 
All  the  countries  in  South  America  not  above  mentioned,  as  well 
as  British  Honduras  and  the  Ulands  in  the  Cariljbean  Sea,  which 
are  not  Spanish  [wssessions.  are  to  be  deemed  common  territory, 
hereinafter  referred  to  as  "Syndicated  Territory";  the  rest  of  the 
world  is  to  be  exclusive  territory  (^f  the  Kuro[)ean  Factories,  lierc- 
inafter  referred  to  as  "European  Territorv."     The  Dominion  of 

sh 
.■d 
by  this  Ai^'reement. 

8.  The  American  Factories  are  to  abstain  from  manufacturing, 
sellin<r,  or  quotinf;,  directly  or  indirectly,  in  or  for  consumi)tion 
in  any  of  the  countries  of  the  Furo[)ean  Territory,  and  the  Euro- 
pean are  to  aijstain  in  like  nr'nner  from  manufacturin<,',  selling;  or 
quoting,  directly  or  indirectly,  in  or  for  consumption  in  any  of  the 
countries  of  the  American  Territory.  With  regard  to  the  Syndi- 
cated Territory  neither  party  are  to  erect  works  there,  except  by 
a  mutual  understanding,  and  the  trade  there  is  to  be  carried  on  for 
joint  account  in  the  manner  hereinafter  detined. 

().  The  .-Vmerican  Factories  shall  forthwith  designate  in  writing 
a  Chairman  and  Vice-Chairman,  who  shall  hold  office  as  such  until 
their  resy)ective  successors  shall  be  appointed  by  the  party  of  the 
first  [)art.and  >-uch  Chairman,  or  in  liis  absence  such  \'ice-Chairman, 
shall  be  the  authorized  representative  of  the  American  Factories, 
to  whom  and  through  whom  all  communications,  acts,  and  trans- 
actions in  respect  of  this  Agreement,  un!';ss  otherwise  stipulated, 
shajl  be  had;  and  the  European  Factories  shall  likewise  forthwith 
designate  in  writing  a  Chairman  and  Vice-Chairman,  to  whom 
shall  be  referred  all  matters  which  by  terms  of  this  contract  are 
made  referrable  '  to  the  Chairman  representing  the  European  Fac- 
tories. The  said  Chairman  or  \'ice-Chairman  shall  jointly  establish 
rules  for  the  carrying  out  of  the  Syndicate  arrangements  hereinafter 
referred  to. 

lo.  The  Chairmen  shall  from  time  to  time  mutually  agree  upon 
a  basis  price  for  each  market  in  the  Syndicated  Te'rritory,  such 
'  Thus  in  original.— Ed. 


^xm 


i8o 


Industrial  Combixations  and  Trusts 


basis  price  to  include  cost  of  manufacture,  freight,  insurance,  land- 
ing charges,  magazine  charges,  and  all  other  charges  until  delivery, 
including  agency  commission  and  the  contribution  towards  the 
Common  Func!  hereinafter  stipulated. 

The  Chairmen  shall  likewise  fix  a  selling  p.'ice  for  each  market, 
which  is  to  I'L  deemed  a  convention  price,  below  which  no  sales  are 
to  clTcct'.a,  and  the  dilTerence  between  the  basis  price  and  the  sell- 
ing price  is  to  be  tlcemed  the  Syndicate  profit,  and  to  be  divided  in 
equal  shares  between  the  American  Factories  and  the  F^urojuMn 
Factories. 

Losses  due  to  bad  debts  ur^  to  be  borne  by  the  parties  effecting 
the  sale. 

11.  A  common  Syndicate  Fund  is  to  be  constituted  by  a  pay- 
ment of  .■?£  per  case  of  75  per  cent,  dynamite,  or  per  case  of  gelig- 
nite, gelatine  dynamite,  or  ])lasting  gelatine,  and  a  jxiyment  of 
such  portion  of  Si  as  the  percentage  of  nitro-glycerine  on  lower 
grade  dynamites  bears  to  7-;  ,  w-  cent,  until  such  Fund  riaches  the 
amount  of  850,000,  when  the  contribution  '-  to  be  reduced  to  one- 
half  the  above-mentioned  rates. 

12.  The  Syndicate  account-,  according  to  druse  10,  made  up  tr 
,^ist  December  in  each  caleii  year  are  to  be  handed  in  by  both 
parties  so  as  to  reach  the  Chairman  of  the  other  party  by  the  15th 
March  nr\t  ensuing,  and  the  payments  for  the  balance  are  to  be 
matle  by  tlie  ^oth  Jum-  following,  when  the  amount  to  be  contrib- 
uted to  the  Common  Fund  shall  likewise  be  paid. 

I  In  regard  to  Clause  12  of  the  .\greenient,  I  have  no  objections  at 
all  to  the  exten.-'ion  of  time  whereat  the  accounts  are  to  rea-h  both 
parties;  namely,  to  .Ajiril  1  ;th.  of  each  year,  instead  of  March  i  sth. 
a- per  Clause  12. — Ft'tlir  April  11,  iS-.wi.l 

The  Common  Fund  shall,  as  du'  Chairmen  mav  decide,  be  in- 
vested in  Government  Securities,  and  it  i-  fmm  this  Fumi  that  any 
fine  or  tines  hereinafter  stipulated,  not  recovered  from  the  parties, 
sli.dl  be  taken.  It  shall  likewise  be  admi>sible  for  the  Chairmen  to 
dis|H).sc  of  two-thirds  of  the  Common  Fund  for  'he  ])urposi;  of  pro- 
tecting the  common  interest  against  outside  competition. 

I},.  .Xny  breach  of  this  agreement  shall  be  adjudicated  upon  by 
the  Chairmen,  and  if  they  cannot  airree  they  shall  ajJiMiint  an 
umpire.  For  the  guidance  of  the  Chairmen  and  umpire  it  is  agreed 
that,  should  either  oi  the  p.irties  erect  factories  in  a  country  re- 
served to  the  other,  the  li(nii<l.it;(l  damage:-<  shall  not  be  iixed  lower 
than  i' 10,000. 


Intern  ■  TiON'AL  Agreements 


i8i 


3 


Should  either  jxirty  trade  in  the  territory  i.f  the  othir  it  sluill  be 
admissible  for  the  Chairmen  to  absolve  them  ui  any  accidental 
breach,  but  if  an  intentional  breach  shall  i)e  proved,  the  tine  shall 
be  the  invoice  value  of  the  ^oods  suppliKi.  Xo  restriction  i>  placed 
on  the  decision  of  the  Chairmen  as  to  the  y^enalty  to  be  imposed  for 
intentional  underselling  in  one  of  the  markets  of  the  Syndicate 
territory. 

14.  It  is  intended  that  in  the  Syndicate  n.arkets  the  arran<,'ement 
should  resemble  as,  far  as  possible  the  coi.vention  arran.iiements 
hitherto  had  by  the  Europeans,  where  the  Agents  meet  from  time 
to  time,  and  come  to  decisions  within  the  limits  of  powers  given  to 
them,  or  where  they  meet  in  order  to  make  recommendations  to 
their  principals. 

15.  The  Chairmen  both  agreeing  have  full  powers  to  vary  the 
Syndicate  arrangements  as  they  may  deem  expedient  from  time  to 
time  in  order  to  mei't  outside  competition  and  to  regulate  business 
for  the  best  in  the  interi>t  of  the  parties  concerned,  and  they  shall 
likewise  have  tlie  power  under  exceptional  circumstances  of  author- 
ising sales   in   the  prohibited   territories. 

16.  With  regard  to  the  markets  in  the  Kuropean  terrilorv  in 
which  the  American  Factories  have  already  done  business,  and  from 
which,  in  accordance  with  the  stipulations  of  this  Agreement,  they 
are  to  retire,  as  well  as  the  markets  of  the  American  territory  in 
which  the  Kuropean  I'actories  have  already  done  bu>ines-,  and  from 
which  they  are,  according  to  the  stipulation;^  of  this  Agreement,  to 
rrtirc.  the  following  is  agreed: 

.\t:cnts  are  as  lar  as  possible  to  be  ntained  by  the  !)arty  who  is 
henciforward  to  do  the  business  in  the  marktt  in  (jue.-tion. 

Magazines  are  in  a  like  manner  to  be  taken  over  at  tluir  pre.-ent 
value  to  i)e  determined  by  mutual  agreement  or  arbitration. 

Stocks,  if  in  good  merchantable  condition,  are  to  be  taken  o\er  at 
full  cost,  /.  r..  the  amount  whidi  the  good>  at  jiresint  cost  with 
a(  cumulated  i  harge-. 

17.  Xothing  hen  in  contained  --hall  l,c  cnn  Inad  to  iire\-ent  either 
ol  ihe  p.irties  hereto  from  carrying  out  any  contract-  for  tlu'  sde  of 
their  products  whii  h  ha\f  been  eiitend  into  in  good  fuith.  prior  to 
the  15th  of  July,  1807.  Contracts  made  after  the  said  date  shall  be 
transferred  to  the  party  by  whom  the  business  shall  be  transferred 
to  the  party  by  whom  the  business  shall  henceforth  be  done  in  the 
market  in  (juestion. 

I'S.    This  Agreement  is  to  be  in  force  for  10  years,  oeginnmg  Irom 


.a 
J 


•..  t^f 


T«2 


Indi-.striai.  roMnixATioxs  Axi)  Trusts 


ihv  15th  (if  July,  i."^  .7,  subjVcl  h.  urittfii  notice  lirin.s^  f^ivon  six 
months  prior  to  the  15th  July,  igoy.  In  the  absence  of  notice  this 
Agreement  is  to  continue  thereafter  fnjm  year  to  year  until  such  six 
months'  notice  of  intendi!  lerminaticin  i-  ,L,'iven." 

19.  Should  any  dilTerence  or  dispute  ari>e  between  the  parties 
hereto,  touchinj^  this  A<,'reement,  or  any  clause,  matter,  or  thing 
relating  thereto,  or  as  to  the  rights,  duties,  or  liabilities  of  any  of  the 
parlies  hereto,  the  same  >hall  be  referred  to  tlie  Chairmen,  who  shall 
arbitrate  thereon,  and  their  award  shall  be  linal.  Slmuld  they  not 
agree  they  shall  ai)point  ;in  rm])ire  whose  award  shall  be  tinal'.  In 
idl  aises  in  which  the  Chairmen  disagreeing  select  an  Um])ire,  the 
following  provisions  shall  apply: - 

If  the  question  or  matter  t()  be  decided  is  lirought  forward  by  one 
of  the  parties  of  the  fir-^t  part,  the  Umiiire  shall  I.-e  a  Kuropean. 
If  on  the  contrary,  the  (|Ue-tinn  or  matter  to  be  decided  i>  bn.uiiht 
forward  by  one  of  tlu' jLirui  -  of  the  .^cond  part,  the  Umpire  .-hail  Ije 
an  American. 

20.  With  regard  to  Patents  which  the  .\merican  Factories  or  the 
I-.uropean  I'adoric,  may  possess  in  cacli  dther-'  territories,  it  is 
uiiderstixid  thai  unless  compelled  by  agreement  with  inventors  to 
take  legal  iimceedings  with  regard  to  alleged  infringements,  no 
legal  proceeding.- are  to  be  t,iken  in  rtsj)ect  of  anN.dliged  infrinL,'e- 
ment  until  an  attempt  h. is  been  made  to-ettle  the  matter  amicably. 
In  order  to  bring  about  such  amicable  under-tanding  the  (|uestii)n 
is  first  to  be  \e[itilated  by  corre--i)ondence  between  the  Ch.iirmeti, 
who  -hall  have  power  to  con-ti'uli'  themselves  an  arbitral  tribunal, 
obt. lining  e\  idence  from  experts  on  both,  -ide-;  and  should  they  hold' 
that  an  infringement  has  been  committtd  tluy  shall  lix  the  rate  of 
royalty  to  be  paid.  Should  they  not  agrei^,  tluy  shall  call  on  par- 
lies to  sign  a  deed  of  submission,  authorising  theni  to  aiipoin.t  an  um- 
pire, "hose  award  siiall  bo  linal. 

Inasmuch  as  the  jurties  have  underlakiii  not  to  manufaiture 
in  each  others"  territories  they  are  not  to  purcha.-e  any  Tatent  for 
each  others'  territories,  except  after  having  given  the'party  inter- 
ested in  the  manufacture  in  the  country  in  (|uestion  the  right  of 
pre-emption  on  the  same  terms  as  the  Patent  is  olTered  to  tliem. 


Transitory 


This  Agreement  is  made  sul)je((  to  ratification  l)v  the  ;iist  Au- 
gust, 1807.    Mr.  Eugene  l)u  Pont,  .Mr.  Bernard  Peyton,  Mr.  \Mi- 


I 


International  Agki;i..mi;nts 


18: 


sen  I'"ay,  and  Mr.  Hamilton  Barksdalu  ha\e  undertaken  to  recom- 
mend and  advocate  Mich  ratification  l)y  the  American  Factories, 
which  is  to  be  notified  to  Mr.  K.  Kraftmeier,  of  55,  C.'harinj^  Cross, 
London,  S.  W.  ('reU'i;rapliit  Address — "Kraftmeier,  London,")  so 
as  to  he  in  his  iMJSscssion  l)v  the  :;i-t  .\u'ju>t.  iSii;.  and  Mr.  Thomas 
Reid,  Mr.  J.  \.  Heidemann,  Mr.  .\hix  A.  l'hilij)i),  and  Mr.  E. 
Kraflnu'iir  will  recommend  and  advocate  such  ratification  by  the 
I'luropean  Factnr'is,  which  is  to  be  notified  to  Mr.  Luuene  l)u  Pont 
so  as  to  be  in  his  possession  by  the  31st  August,  1897. 


.:*  i 


F.XHIRIT   4 
.\LrMI\r\l    (OMI'AW    OF    AMKRICA  ' 

THE  A.  J.  A.  G.  AGREEMENT  OF  SEPTEMBER  25,  HOS 

Al'oiil  September  :!5,  mo'^,  the  defend. uit  .Miiniinuni  ('i'lnjiany 
of  .VnuTica,  aclinic  through  tiie  Northern  Ahiminuni  Company,  of 
Canathi,  which  is  entirely  owned  and  contr'.ilk'd  i)y  defendant,  en- 
tered into  an  agreement  with  the  so-called  Swiss  or  Neuhauscn 
Company,  of  Europe,  which  i-.  the  lar;:e-t  of  the  E.uropean  com- 
panies engaged  in  the  aluminum  industry  and  de'-i;,Mi.:'  -d  in  this 
agreement  as  "A.  J.  .\.  Ci.,"  parl^  thereof  niateri.d  to  ihi>  action 
bein^T  as  follow^: 

2.  'I'he  \.  .\.  Co.  a^ree  not  to  knowingly  ^ell  aluminuni,  directly 
or  iniliri'cliy,   in   the    European   market. 

The  .\.  J.  .\.  (i.  aj^ree  not  to  knowingly  sell  .iluminum,  dirc^ctly 
or  indirectly,  in  the  American  market  (defined  a<  North  and  South 
.\merica,  with  the  exieption  of  \\\v  Ciiited  States,  but  including 
\Ve>t  Indies,  Hawaiian  and  I'liilijipine  Inlands). 

4,  The  total  deliverii'S  to  be  m.ide  by  the  two  ( oniiiaiiie^  '-hall  be 
divided  as  follows: 

European  market,  75'  J  to  \,  j.  .\.  C,  2',',l  to  X.  .\.  Co. 
American  market,  25%  to  .\.  j  .\,  G.,  75%  to  X.  A.  Co. 
Common  market,  50*^/-  to  \.  J.  .\.  G.,  5o9r  t*i  ^»-  ^   ^'^ 

The  Government  sales  to  Switzerl.md.  Germanv,  and  .\u>tria- 
Mun^ary  are  understood  to  be  re^er\ed  to  tin  A.  |.  A.  (1. 

'  I'liitid  Sliili\  (if  Amfrira  v.  Aluminum  Company  of  Amrrica.  Petition  in 
Kiiuily,  In  the  Dislrii  t  Court  of  the  United  States  for  the  Western  District  of 
IVnnsylvania,  pp.  15-16. 


IP 


,».lij 


i84 


Inuustriai,  Combinations  and  Trusts 


The  S.iks  in  the  U.  S.  A.  arc  understood  to  be  reserved  to  the 
Aluminum  Company  of  America. 

\ccordinL'ly  the  A.  J.  A.  G.  will  not  knowingly  sell  alummum, 
directly  or  "incUrecllv,  to  the  U.  S.  A.,  and  the  \.  A.  Co.  uiU  not 
knowingly  ^e!l,  directly  or  indirectly,  to  the  Swiss,  German,  and 
Austria-l'lun^^arian  Governments. 

S-  'I'he  X.  A.  Co.  entjajJies  that  the  Aluminum  Company  of  Amer- 
ica will  respect  the  prohilMtions  hereby  laid  upon  the  N.  A,  Co. 

Said  ajireement  became  effective  October  i,  igoS,  and  provided 
that  it  >houKl  "last  until  terminated  by  a  si.x  nK)nths'  written  no- 
tice," and  petitioner  avers  that  >aid  agreement  became  ctTective 
and  has  been  continuously  since  saiil  date,  and  is  now,  in  full  force 
and  effect,  unless  terminated  by  notice. 


CHAPTER  IX 

POOLS  AXl)   ASSOCIATIONS 

NOTE 

\s  indicated  in  the  note  to  Chapter  T,  the  Pool  has  been  one  of 
the  uw-t  iHTsi^tenl  tvpes  of  combinalion.  In  spite  of  its  numerous 
(li-ulvantages  and  allep;ed  weaknesses,  it  has  served  as  a  means 
..1  combination  in  far  more  instances  than  has  the  Fru^t  and  in 
this  resi.ect  mav  be  rej^arded  as  a  close  competitor  of  that  other 
('cvice-  the  Holding  Company.  Pools  may  be  ori,nini/.ed  lor  a  wide 
variety  of  purposes;  to  divide  territory,  to  rais^  prices,  to  poo 
,,r,)fits  to  restrict  output,  to  divide  output  and  others,  or,  a  pool 
may  embody  several  of  these  purposes  in  its  programme.  ThouRh 
the  -eneral  structure  of  such  organizations  is  about  the  same  the 
variations  of  type  arc  great.  For  that  reason  there  has  been  brought 
together  a  collection  of  pooling  agreements  which  cover  a  wule 
field  They  are  fairly  typical  illustrations  of  this  organization  and 
are  selected  to  give  a^ comprehensive  an  idea  of  this  forni  ot  c<.m bi- 
nal  ion  as  possible.  In  the  majority  of  cases  the  object  of  the  pool  is 
suihciently  stated  in  the  terms  of  the  agreements.— Ld. 


i*h 


■« 


Exhibit  i 
the  stekl  rail  pool  ' 

Mrmnrandum  nf  ai^rrrmnit.  nitrrrd  into  Aui^ust  .,  iSSy.  by  and 
br!-.rrn  the  SorthChua^o  Rolliui^  Mill  Company,  the  Cambna  Iron 
Company,  the  Pennsvhania  Steel  ( -ompany.  the  I  n.on  Steel (  mnpany. 
the  Laekaivanna  Iron  and  Coal  Company,  the  Joliet  .S/o-  Company, 
the  Western  .Steel  Companx.  the  Clrceland  Rolling  .Mill  (  ompany. 
Carnecie  Brothers  L"  Co..  Limited:  Carnegie.  I'hipps  c-  (  o..  Urn!'''!: 
the  Bethlehem  Iron  Company,  the  .S< ronton  Steel  Company  the  I roy 
.Steel  L-  Iron  Company,  the  Worcester  .St,, I  Works  and  the  Spnm;- 
Jieil  Iron  i  Kmpany. 

'  Report  of  the  Commissionrr  of  Con  K-rations  on  the  Steel  Industr>-.    Part  1, 

pp.  69-71. 

185 


5    i\ 


i86 


Industrial  Combination's  and  Trusts 


We,  the  before-named  companies  and  corp 
turers  of  steel  rails,  hereby  mutually  a^rec  one' 


irations,  manutac- 
with  the  other,  that 


WC  \V1 


11  restrict  (jur  sales  a'nd  the  product  of  steel  rails  of  50  pounds 
to  the  yard  and  upward,  applvinij;  to  orders  tal.en  by  us  and  to  be 
delivered  by  us  or  from  our  resjieetive  works  during  the  year  iSSS.  as 
hereinafter  allotted  and  limited;  and  we  respectively  bmd  ourselves 
not  to  sell  in  excess  of  our  current  allotments,  without  lir>t  (iljtain- 
in2  the  consent  of  the  Board  of  ("ontTol  thereto  -that  is  to  say. 

It  is  a^reetl,  there  shall  now  be  made  an  allotment  of  Soo,ooo  tons 
of  rails,  which  shall  be  divided  and  apportioned  to  and  amon^  the 
sevcral'parties  hereto  to  be  sold  by  them  during  the  year  iSSS,  ui)on 
the  foUowint^  basis  of  percentaj^es,  to  wit;  Xorlh  Chicago  Rolling 
Mill  Company,  12-'  ■',  jht  cent;  Pennsylvania  Steel  Company,  0-/10 
per  cent;  Bethlehem"  In^n  Company  0  per  cent;  Carnegie  Bros.  & 
Co  ,  Limited,  and  Carne,L,de.Phipps&  Co.,  Limited  (jointly),  i ;,-''■  1.) 
per  cent;  Joliet  Steel  Company,  S  per  cent;  Lackawanna  Ihmi  and 
Coal  Company,  S  per  cent;  dmbria  Iron  Company  S  per  cent; 
Scranton  Steel  Company,  S  per  ^ent;  the  Union  Steel  Company, 
8  per  cent;  Cleveland  Rolling  Mill  Company,  4-^10  per  cent;  Troy 
Steel  &  Iron  Comi)any,  4--' 10  per  cent;  Western  Steel  Comi)any, 
4-';io  per  cent;  Worcester  Steel  Work:^,  i-Vio  per  cent. 

And  in  addition  to  the  said  allotmeni  of  Soo.ooo  tons  of  rails 
above  allotted,  an  additional  allotment  of  250,000  tons  is  hereby 
made  and  allotted  to  the  Board  of  Control,  to  be  reallotted  and 
reapportioned  by  it,  as  and  to  wh.oin  it  may  deem  eiiuitable,  in  the 
adiustment  of  any  differencts  that  may  ari-e.  It  bein-  also  further 
a^'reed  that  all  subsequent  allotment,  of  rail,,  hereafter  made,  to  be 
sold  under  this  a.^reement  during  the  year  iSSS,  <hall  also  be  di- 
vided and  apportioned  to  the  several  parties  hereto  in  the  same 
ratio  of  percentages  a>  said  apportionment  of  Soo,ooo  tons  is  herein 
divided  and  apportioned.  ,    ,    ,,    . 

It  is  further  a.^reed,  that  tlie  Board  of  Control  sh;;ll,  from  time  to 
time,  make  such  further  allotments  as  shall  be  necessary  to  at  all 
times  keep  the  unsold  allotments  at  least  ;oo,ooo  tons  in  excess  of  the 
total  cur'-enl  sales,  as  shown  by  the  monthly  reports  of  sales.  This  is 
to  be  in  addition  to  the  then  unappropriatt  .1  part  of  the  250.000  tons 
herein  before  alloted  to  the  Board  of  Control  to  adjust  ditfercnccs. 

It  is  further  a-^reed,  i.n  the  first  (kiy  of  April,  July  and  October, 
the  Board  of  Control  are  authorized' and  directed  to  cancel  such 
part  of  the  unmade  allotments  of  the  respective  i>arties  hereto  as 
they  the  iviid  Board  of  Control  shall  determine  such  party  unable 


Pools  and  AssociAiioxs 


187 


to  make  in  due  time,  and  all  allotment-  ^(l  caneeled  the  Board  of 
Control  >hall  have  the  rit;;ht  to  reallot  to  any  of  the  other  partie., 
hereto;  it  being  understood  that  all  such  cancellations  shall  a])ply 
only  to  allotments  standing  to  the  credit  of  the  rc-pective  parlir- 
hereto  on  the  dates  abov-  named,  but  no  reallntnunt  as  aforesaid 
shall  be  made  by  the  Board  ul  Control  to  any  of  the  parties  hereto 
fi.r  the  purpose  of  enablin"  tfiem,  or  any  of  them,  to  make  and  sell 
rails  from  ft^reign  made  blooms. 

It  is  further  agreed,  that  all  transfers  of  parts  of  allotments  from 
one  party  to  another  .hdl  be  made  by  the  Board  of  Control. 

It  is  further  agreeil,  that  there  shall  be  a  Board  of  Control,  con- 
sisting of  three  members,  namely  Orrin  W.  Potter.  Luther  S.  Bent 
and  \V.  W.  Thurston,  who  shall  have  power  to  employ  a  paid  secre- 
tarv   and    tn.-asurer. 

I't  is  further  agreed,  that  the  Beard  of  Control,  upon  the  written 
consent  of  75  per  cent  of  the  percentages  as  hereinbefore  named, 
shall  increase  the  allotments  for  the  year  iSSS,  and  such  increase 
shall  lie  allotted  to  the  parties  hereto  as  hereinbefore  provided. 
It  is  further  agreed,  that  each  party  whose  name  is  hereunto 
annexed,  sha'l  and  will  make  monthly  returns  to  the  Board  of  Con- 
trol of  all  contracts  for  delivery  ^)f  rails  of  50  pounds  to  the  yard  and 
upward  during  the  year  iNSS,  and  also  of  all  shipments  of  such  rails 
made  by  them  during  said  year;  a  copy  of  such  return  shau  be  fur- 
nished to  each  partv  hereto. 

It  is  further  ag.eed,  that  all  the  parties  hereto  shall  and  will, 
on  or  before  January  15.  iSSS,  make  a  w  itten  return  to  the  Btiard 
of  Control  of  all  the  rails  of  50  pounds  to  the  yard  and  ujnvard 
(designating  the  weight)  which  they  re^i)ectively  ha(l  on  hand  Jan- 
uary I,  1S88,  stating  whether  the  same  are  sold,  and  if  sold,  on  what 
order  they  applv. 

It  is  further  agreed,  that  the  Board  of  Control  shall  have  the 
right  whenever  tluv  deem  it  expedient  to  convene  a  meeting  of  the 
parties  hereto,  and'thcy  shall  give  at  least  ten  days'  previous  notice 
of  all  meetings,  and  any  business  transacted  at  such  meetings,  and 
receiving  75  per  cent  of  the  votes  present  thereat,  eitlu  r  in  person 
or  by  proxy,  shall  be  l)inding  on  all  the  parties  hereto,  excejjting  as 
to  a  change  in  percentages  a-;  aforesaid: 

The  Board  of  (^mtrnl  shall  be  reu.uired  to  call  a  meeting  of  the 
parties  hereto  when  re(|ue>ted  so  to  do  in  writing,  signed  by  any 
three  of  the  contraiting  parlies,  but  such  re(|uest  and  such  notice 
shall  state  the  oldcct  lor  which  such  meeting  is  called. 


ipi 


1 88 


InUI'STRIAL    CoMlllN.MIONS    AM)    TlU'STS 


ll  AvdW  be  the  duly  of  the  Boan 


Control  to  havcajiroper  rec- 


ord kept  of  all  the  returns  made  to  it,  with  i)ov  er  from  time  t' 
time  to  change  the  form  of  return  as  they  may  deem  expedient. 

The  Board  of  Control  shall  have  authority  to  levy  an  assessment, 
pro  rata  to  the  allotted  tonnage,  to  deiray  the  actual  expenses  made 
necessarv  to  carry  out  this  agreement. 

It  is  further  aj;reed,  that  we  will,  respectively,  immediately  make 
return  to  the  Board  of  Control  of  all  rail>  of  50  pounds  to  the  yard 
and  upward  which  we  are  now  under  contract  to  deliver  durinj;  the 
year  iSSS,  said  return  to  state  to  whom  such  rails  are  sold  and  when 
they  ar    to  be  delivered. 

(Signatures) 


[•".XIIIBIT    2 

CONSTITUTION    AND    BY-LAWS    OF    THE    MICHIGAN    RETAIL    LCMBER 
DEALERS   ASSOCIATION  ' 

The  title  of  this  association  shall  be  the  Michigan  Retail  Lumber 
Dealers"  As-ociation,  and  its  object  is  hereby  set  forth  in  the  fol- 
lowing declaration  of  principles. 

We  seek  to  establi>h  the  eciuitable  principle  that  the  retailer 
shall  not  be  subjected  to  competition  with  the  parties  from  whom 
he  buys;  that  a  fair  opi)ortunity  shall  be  otTered  the  man  who  in- 
vests his  time  and  money  in  the  retail  l)usiness.  and  a»umes  the 
risk  which  such  business'inevitably  involves,  to  earn  an  ade(|uate 
remuneration  for  his  labor  and  the  us-j  of  his  capital.  We  seek  al.-o 
to  promote  that  '-i)irit  of  harmony  in  the  trade  which  shall  prompt 
every  detail  dealer  to  maintain  friendly  relations  with  his  com- 
petitors at  home  and  his  brother  retailers  everywhere. 

Article  I. — Membership. 

ELICIBILITV. 

Section  i.  .\nv  person,  t'lrm,  or  corjxtration  within  the  terri- 
tory of  this  association  who  may  be  regularly  engaged  in  tlie  lumber 
trade,  carrying  at  all  limes  an  asM>rted  stock  of  lumber,  or  lumljer. 
sash,  doors,  etc.,  commensurate  with   the  demands  of  his  com- 

'  Unitrd  States  nf  Amcrii\i  v.  FJuMrd  E.  Ihirtwkk.  rl  al..  On;;in;il  IVtiti'Ui. 
In  the  Cirruit  Court  of  tlii'  United  Slates  for  the  i;;isttTn  I)i>tria  of  MidiiKan, 
SouthiTii  Division.  Kxhitiil  A,  pp.  4-'  5-!-  The  .Miihit;aii  Retail  Lumber  Dealers 
Association  was  first  organi,;ed  about  :8S8or  1S89.— Kd. 


Pools  and  Associations 


1^0 


nninitv  (the  cquivalcnl  of  75,000  fct't  of  lumber  in  small  cit:(.>  and 
country  lowr.^  being  ;j;encrally  con.-idcred  a  minimum  stock  for  a 
retail  lumberyard),  and  who  is  in  the  business  for  the  purpfi,-e  of 
selling  lumber  at  retail,  and  who  keep.;  an  olTice  open  during  regular 
business  hour-,  with  a  competent  f)erson  in  charge  to  attend  to 
the  wants  of  customers  at  all  time^,  sliall  be  considered  a  legiti- 
mate lumber  dealer  and  may  be  eligible  to  memiiership  in  the 
association. 

IiOrBT    AS    TO    KI-IGIBILITV. 

S/.c.  2.  Any  doubt  or  question  arising  as  to  who  may  be  eligible 
to  membership  in  this  association  shall  be  referred  to  the  board  of 
directors  to  determine,  and  their  decision  shall  be  tinal. 

TERMINATION. 

Sec.  ;,.  Whenever  any  member  shall  cease  to  keep  a  regular 
assortment  of  lumber,  as  set  forth  in  section  i,  he  shall  cease  to 
be  a  member  of  this  association. 


WITHDRAWAL,    HOW    MADE. 

SF.r.  4.  .\nv  member  whose  duties'  arc  paid  in  full  may  with- 
draw from  nu'ml)ership  by  giving  notice  to  the  secretary  in  writing 
and  surrendering  his  certificate  of  membership,  but  memberships 
are  not  transferable  except  by  vote  of  the  board  of  directors. 

PENALTY  for  NONPAYMENT  OF  ANNUAL  DUES. 

Sec.  5.  If  any  member  shall  neglect  or  refuse  to  pay  the  dues 
provided  for  in  the  rules  of  this  association  within  Oo  days  after 
due  notice  by  the  secretary,  the  secretary  may  strike  his  name 
from  the  rolls';  and  no  member  shall  be  entitled  to  make  complaints 
for  shipments  in  his  territory  while  in  arrears  for  dues,  nor  until 
such  arrears  are  paid  in  full. 

member's  liability  to  St  spension. 

Sec.  b.  .Any  member  of  this  association  who  shall  habitually 

fail  to  meet  his  engagements  with  the  wholesale  members  or  sh:\!! 

so  ev.nduct  himself  as  to  bring  reproach  upon  the  association,  and 

shall  be  reported  by  any  member  to  the  secretary  of  this  associa- 

'  Thus  in  ihe  original. — Ed. 


IQO 


Industrial  Combinations  and  Trusts 


tinn,  shall  bo  cited  to  apjicar  lulore  llu'  hoard  of  directors,  and 
should  he  fail  to  ,-atisfy  the  hoard  of  directors  he  shall  !io  longer 
he  considered  a  member  of  this  association  and  a  partici[)ant  in  its 
benefits. 


Article  II. — Complaints. 


WHO   SHALL    MAKE. 


Section  i.  Any  member  of  this  association  who  considers  that 
he  has  just  cause  for  complaint  against  any  wholesaler  or  manu- 
facturer or  their  agents,  may  hie  said  complaint  with  the  secretary, 
of  this  association. 


HOW    MADE. 

Sec.  2.  All  complaints  shall  be  made  in  writing,  giving  as  full 
particulars  as  possible,  including  dates  of  shii)ment  and  arrival, 
car  number  and  initials,  original  point  of  shipment,  names  of  the 
consigner  and  consignee,  the  jnirpose  for  which  material  was  used, 
and  any  other  particulars  which  can  be  learned. 

TIME  limit. 

Sec.  7,.  .\11  complaints  to  be  handled  by  this  association  must 
be  i'lled  with  the  secretary  within  ,^o  days  after  receijit  of  ship- 
ment at  point  of  desiinati(m.  Xo  complaint  from  any  member 
will  be  considered  when  made  on  account  of  sales  or  shipments 
made  within  15  days  after  the  date  of  said  member's  certificate  of 
membership. 

independent    ACTION. 

Sec.  4.  In  case  any  member  elects  U'  take  up  his  own  complaint 
direct  with  the  shipper  instead  of  hling  the  same  with  the  seere- 
tary,  as  provided  in  foregoing  sections  he  shall  not  thereafter  be 
privileged  to  have  said  complaint  taken  up  by  association. 


SECRETARY  S    Dl  TV    IX    REFERENCE     lu    ( DMl'l.AlNTS. 

Sec.  6.  It  shall  he  the  duty  of  the  secretary  at  once  to  notify 
the  party  or  parties  against  whom  complaint  has  been  made,  \-  ilh- 


t 


Pools  and  Associations 


T91 


out  p:iving  the  name  of  the  party  making  the  complaint.  Ti  tlic 
tran^.action  complained  of  was  made  by  a  commission  menhuit, 
ai,'ent,  or  broker,  or  other  person,  the  principal  for  whom  they 
act  shall  also  be  notilied  and  shall  be  considered  jointly  liable. 


PRIMARY    RULING   ON    RETAIL   DEALERS. 

Sec.  7.  The  primary  decision  as  to  who  are  and  who  are  not 
regular  retail  lumber  dealers,  in  the  territory  of  this  association, 
shall  rest  with  the  l)oard  of  director-^,  '.^ut  in  the  event  of  any  dif- 
ference of  opinion  ari.-ing  over  the  ruling  of  the  board  in  such  ca>e3 
the  same  shall  be  submitted  to  arbitration,  according  to  rules  here- 
inafter provided  for  the  adjustment  of  complaints,  but  no  sale 
made  to  any  individual  or  I'lrm  whose  status  may  not  have  been 
hnally  determined  shall  lie  subject  to  any  penalty  if  it  shall  appear 
that  due  diligence  has  be.'n  employeil  by  the  party  making  the  sale 
to  satisfy  himself  that  the  purchaser  was  entitled  to  recognition 
as  a  dealer. 

PLAN   OF   ARBITR.\TION. 

Sec.  8.  In  the  event  that  any  claim  is  made  against  a  manu- 
facturer or  wholesaler  who  may  be  a  member  of  any  regularly  or- 
ganiziil  association  of  manufacturers  or  wholesalers,  it  shall  be  the 
duty  of  the  secretary  to  refer  the  matter  to  the  secretary  of  such 
manufacturers'  or  wholesalers'  organization  and  to  recjuest  the 
immediate  presentation  of  the  case  to  the  Darty  complained  of 
and  the  adjustment  of  said  claim. 

If  it  be  found  impossible  to  adjust  the  claim  through  the  efforts 
of  the  secretary  of  this  association  acting  on  behalf  of  the  retailers, 
and  the  secretary'  of  the  manufacturers'  or  wholesalers'  organiza- 
tion, acting  on  Ijehalf  of  the  manufacturers  or  wholesalers,  then 
the  matter  shall  be  referred  to  a  board  of  arbitration,  consisting  of 
one  member  of  this  association  and  one  member  of  any  organization 
of  manufacturers  or  wholesalers  with  which  the  party  complained 
of  may  be  ulentiUed,  and  it  shall  t)e  the  duty  of  the  president  of 
this  organization  as  often  as,  and  when  necessary,  to  appoint  any 
member  to  act  as  arbitrator  on  behalf  of  this  association  and  its 
members.  The  two  persons  so  selected  shall  have  power  to  select 
a  third  person  to  act  with  and  constitute  the  board  of  arl)itrators, 
which  shall  be  authorized  to  fully  adjust  the  claim,  the  decision  of 
such  board  of  arbitratiirs  to  be  lina)  and  binding  on  all  parties. 


^.^ 


192 


ixUUSTRlAl.    CoMlUNAIlONS    AND    IrUSTS 


Article  III. —Territory. 

TI.KRiniKV    Dr.SCRIIl'lD. 

Section  i.  Members  ^hall  be  entitled  to  llu'  jirotcction  of  this 
association  onlv  at  such  places  where  llu\-  operate  yards  ar.  they 
shall  de>ire  to  have  i)lacc(i  on  the  memberihii)  lists  and  for  which 
there  shall  pay  annual  dues  for  each  place  so  protected.  It  shall 
be  understood,  however,  that  sidetracks  or  small  towns  where 
there  are  no  regular  retail  lumber  yards,  iind  which  may  be,  under 
a  reasonable  construction,  considered  within  the  territory  of  mem- 
bers, shall  be  included  within  such  protection  without  extra  charj^e. 

OTHER   ASSOCIATIONS. 

Sec.  2.  It  shall  Ik  contrary  to  the  spirit  of  this  association  for 
any  of  its  members  to  make  or  cause  to  be  made  shil)ments  into  tb.e 
legitimate  territory  of  members  of  other  associations  of  retail 
lumber  dealers,  and  members  who  shall  so  otlend  shall  be  made 
subject  to  such  discipline  as  may  be  provided  in  the  rules  of  this 
association. 

POACHERS. 

Sec.  3.  Any  person  or  persons,  whether  carrying  a  stock  of 
lumber  or  not,  makinj:;  a  practice  of  quoting  prices,  selling  or  shij)- 
ping  (to  other  than  regular  dealers"^  luml"T,  sash,  doors,  etc.,  into 
territory  under  the  protection  of  this  association,  where  said  per- 
son or  persons  have  no  yards,  shall  be  designated  '■jxjachers." 
When  said  poachers  are  reported  in  the  membership  list  and  noti- 
fication sheet,  they  will  be  con>iderctl  a-  consumers  at  points  other 
than  where  they  may  own  yards,  and  any  wholesaler  or  manufac- 
turer, or  their  agents  making  sales  or  shipments  to  ^aid  iiarties 
in  the  territory  of  any  member  of  this  association,  after  being 
thus  reported,  will  be  cnmsidered  as  having  sold  or  shiiiped  to  a 
consumer. 

Article  IV. — Standard  vf  i^radcs. 

In  all  cases  of  dispute  as  to  f)uality  of  lumber  arising  between 
a  member  of  this  association  and  a  member  of  a  wholesalers"  or 
manufacturers'  association,  the  established  grading  rules  of  the 
association  to  which  the  wholesaler  or  manufacturer  belongs,  shall 
be  taken  as  a  basis  of  grade  on  which  settlement  shall  be  made, 


Pools   a\d    Associations 


19,- 


unless  a  special  ai^rcemcnt  in  writing  for  a  special  grade  shall  have 
been  made  when  lumber  was  purchased. 

Article  \ .—Rrciprodty. 

Reciprocity  is  in  direct  line  with  the  true  principles  of  all  retail 
lumbermen's  associations,  and  this  association  does  hereby  pledge 
its  members,  as  far  as  it  is  practical  and  possible,  to  buy  only  of 
firms  whose  names  appear  on  our  membership  lists  or  those  of 
kindred  associations. 


Article  VI. — AdJ'tional  rules. 

The  work  of  this  association  shall  be  further  set  forth  in  detail, 
as  to  management  and  guidance  of  its  members,  by  the  adoption 
of  such  other  measures,  to  lie  known  as  rules  or  by-laws,  as  may  in 
accordance  with  this  constitution  be  established. 


Article  VII. — Amendments. 

Am.endments  to  this  constitution  may  be  made  at  any  regular 
meeting,  or  special  meeting  called  for  that  purpose,  by  a  vote  of 
at  least  two-thirds  of  tlrj  members  present  and  voting. 

BY-LAWS. 


Skc.  3.  Whenever  and  as  often  as  any  wholesaler  or  manufac- 
turer, dealer,  or  his  agent  shall  sell  luiiiber.  sash,  doors,  or  blinds  for 
building  purposes  to  any  person  not  a  regular  dealer,  any  member 
doing  business  at  the  nearest  point  to  which  shipment  was  made 
shall  notify  the  secretary  of  this  association,  giving  him  the  date 
of  shipment  as  nearly  as  possible,  value  of  same,  etc.,  anfi  the  secre- 
tary shall  at  once  make  demand  of  the  wholesale  dealer  or  manu- 
facturer who  made  such  shipment,  notify  him  that  his  association 
has  a  claim  not  to  exceed  10  ]K'r  cent  of  the  value  of  said  sale  at 
the  point  of  shipment.  If  the  secretary  settles  the  claim,  the 
money  so  collected  shall  be  turned  into  the  treasury  and  a  draft 
made  on  the  treasurer  for  the  amount,  said  draft  to  be  forwarded 
to  the  party  making  the  claim.  If  the  secretary  does  not  succeed 
in  making  the  settlement  and  same  is  contested,  he  shall  refer  the 
matter  to  the  arbitration  committee,  whose  duty  it  shall  be  to  hear 


u)4 


iNDrSTRlAl.   ('..MmXATIONS    AND 


RUSTS 


>rt  lo  the  secre- 

lu  al)ide 
Uu'  (luiv 


both  sides  of  the  ea>e.  detennine  the  elaim.  and  ui-ur 
tarv      If  the  manufacturer  or  \vlU)le>ale  dealer  reli>t, 
hv  the  decision  of  the  arljilrallon  committee,  it  Miail  h'^ 

to  secretary  immediately  to  notify  the  member,  ot  the  a»ocu  - 
tion  of  the  name  of  >uch  Wholesale  dealer  or  manulacturer.  It 
an  member  continue,  to  deal  with  such  wholesale  ^l^-ler  or  manu- 
facturer, he  shall  be  expelled  fron.  this  as..ociatH,n:  Provided  I  hat 
n  thin-  in  this  section  be  so  construed  as  to  entule  ^-^f^"^ 
make  complaint  for  any  lumber  sohl  to  manutacturersa.  .letmed 
nVection     of  Article  II  of  the  constitution  of  tins  association. 

Sic    4    In  the  event  that  any  claim  is  made  aROinst  a  manu- 
facturer who  may  be  a  member  of  any  rr^ular  organized  a..ocia- 
t?< m  of  ,m  lufTrtlrers.  it  shall  then  be  the  duly  of  the  sccreta  y 
a  -  r  the  matter  to  the  secretary  of  such  ^-^^^^^^^Z. 
nation  and  re(,uest  the  immecu.te  presentation  ot  the  ca>e    o  the 
party  complainecl  of  and  the  adjustment  ot  the  claun.     I.  it    ^ 
found  impossible  t<.  adjust  the  claim  through  the  secretary  ot  thi. 
Sation.  acting  on  Lhalf  of  the  -tailer,  ami  the  secretary  o 
the  manufacturers'  orizani/ation.  act..iK  -r,   .x'ha  f  ot   the  n  hole 
s  ler  or  ma  ifacturer,  then  the  matter  <hall  l>e  referred  to  a  board 
i'^bUniiion.  consisting  of  one  men.ber  of  thi>  --.^u.  a^ 
cne  number  of  any  organization  ».f."^,^""ff  .\"^;'-^;    .'  ,   'ij  ^^ 
party  complaine-i  of  may  be  identit.ed  (and  i    shall  be  the  dut>  ol 
fhe  presalent  of  this  association,  as  often  as  and  whenever  nccessa  > 
to  appoint  a  person  to  act  as  arbitrator  on  behalj  ^^^ ^^VT^^^ 
tion  and  its  members),  and  the  two  persons  so  cho>en  >^f\^'^''^\ 
^er  to  select  a  third  person  to  act  with  and  complete  the  board 
of  arbitrators,  who  shall  be  authorized  fully  t<>  adjust  the  el.um. 
their  decision  to  be  final  and  binding  on  all  parties.  _ 

Skc  ^  Whenever  and  as  often  as  any  "commission  man 
shall  sell  lumber,  sash,  doors,  or  blind,  to  any  iK-rson  not  regular 
dealers,  as  defme.1  in  section  i  of  Article  1  of  the  constitution  of 
this  association,  he  shall  be  treated  as  a  manufacturer  or  wholc- 
siler,  ami  ^hall  be  reported  to  the  members  ot  this  association  m 
the  same  manner  as  a  wholesaler,  as  described  in  section  4  of  these 

^Sfc  %  .\ny  wholesale  dealer  or  manufacturer  selling  to  a  "com- 
mission man-  or  shiiiping  <.n  his  <,rder  to  any  person  or  persons 
not  regular  dealers  shall  be  hel.l  liable,  the  s.me  as  if  he  had  made 
the  sale  himself,  and  be  subject  to  the  penalty  as  described  in  sec- 
tion 4  of  these  by-laws. 


I  I 

I  ' 


J 


PnOI.S     AXD     AsSfX  I ATIDNS 


195 


Sec.  7.  No  complaint  shall  be  entertained  from  a  member  a;;ain?t 
a  wholesale  dealer  or  manufacturer,  in  accordance  with  the  provi- 
.-^ions  of  secti(/n  3  of  these  by-laws,  for  a  bill  of  lumber  ordered  from 
a  wholesale  dealer  or  manufacturer  vilhin  15  days  from  the  date 
of  his  certificate  of  membership;  and  no  complaint  shall  be  enter- 
tained from  any  member  who  is  three  months  in  arrears  for  dues. 

.Si'.r.  S.  If  any  person  or  persons  after  having;  been  reportttl  to 
the  members  of  this  a>suciali(in  in  accordance  with  the  provisions 
of  section  3  of  these  by-laws,  violating  the  rules  of  this  association 
shall  make  such  settlement  as  the  board  of  directors  shall  recjuire, 
the  secretary  shall  immediately  notify  the  members  of  such  settle- 
ment. 

Six;.  9.  Xo  claim  shall  be  made  on  wholesale  dealers  or  manu- 
facturers for  sales  made  to  consumer-  nr  contractors  within  a  dis- 
tance of  15  nu'les  from  the  public  sfjuari'  of  any  wholesale  market, 
provi(le<l  said  lumber  is  consumed  within  said  distance;  also  pro- 
vided that  said  territory  shall  be  so  confined  by  this  association 
(ir  its  board  of  directors. 


ExmriiT 


rUND.\MENT.\I,    AGREFMKNT       i)F    THE   EXPLOSIX  F    TRVDT    ' 

This  .XcRKtMiNT,  made  thi"^  loth.  day  nf  Deceml)ir,  iSSi),  pk- 
rwr.iN  E.  I.  Dl  I'ont  de  Xr.Moi  ks  I'v  C'o.mi'anv,  a  C()-])artnership 
doing  business  near  Wilmington.  Delaware;  The  Hazard  Powder 
Company,  a  corjioration  organized  under  the  laws  of  the  State  of 
Connecticut;  the  Lam.in  &:  Rand  Powder  Comi-any,  a  corporation 
nruani/.ed  under  the  laws  of  the  State  of  New  York;  the  three  in- 
dividual concerns  named  in  the  foregoing  l)eing  in  some  of  the 
jirovisions  hereof  grouped  as  one  collective  party,  and  calUd  liie 
"I'hree  Companies";  and  the  Orhntai.  Powder  Miils.  a  cor- 
liorativm  organi/.eci  under  the  laws  of  the  State  of  Maine;  The 
American  Powder  Mills,  a  corporation  organi/cd  under  the 
laws  of  the  State  of  Massachusetts;  the  At  stin  Powder  Co.\ii'ANY, 
the  Mexmi  Powder  Company,  The  Kinc.  Powdir  Cump.\ny, 
The  Ohio  Powder  Company,  said  last  named  four  corporations 
being  organiml  under  the  laws  of  the  State  of  Ohio;  The  Sycamore 
I'owDER  Company,  a  coqioration  organized  under  the  laws  of  the 
State  of  Tenncs.see;  the  L..KE  Superior  Powder  Company,  a 

'  rnilid  Slates  of  Anurita   v.   E.  I.  du   Pout  th  S'rmours   and  Company. 
CiiMTimKnl  Kxhibil  .No.  0,  I'et.  Rtt.  ll.xhibils,  vol.  t,  pp.  v4  ff. 


10 


I:;dustrial  Combinations  and  Trusts 


corporation  ■  ranized  under  the  laws  of  the  State  of  .Mi;lii,c;an;  the 
Marckllus  i'owDKK  Ct)Mi>\NV,  a  corporation  or<^an;/,ed  under 
the  laws  of  the  State  of  New  York. 

WnKREAS.  the  i)arties  hereto  make  and  sell  gunpowder  for  blast- 
inj^  or  sporting  purposes,  or  both;  and 

Wui-:ri:as,  the  said  parties  now  enjoy  trade  of  a  rrrtain  amount 
in  one  or  both  of  the  said  two  kiiids  of  powder;  and 

Wur.RKAS,  for  the  purjjoses  of  this  asreemenl  "  Blastint^"  jiowder 
is  defined  to  be,  such  powder  as  is  made  of  either  nitrate  of  pola,-.-a 
or  nitrate  of  soda,  mixed  with  charcoal  and  sulphur,  and  (le>if^ned 
to  be  u^cd  for  mining  or  l)la^ting  operations;  and  "Sporting" 
powder  is  deluied  to  be  such  powder  as  is  made  of  Nitrate  of  po- 
tassa,  charcoal  and  sulphur,  and  designed  for  use  in  sma""  arms, 
(rilles,  or  smooth  bores),  cannon,  mortars  and  s'^ells;  or  in  the 
manufacture  of  fireworks,  safety-fuse  and  scjuibs:  '  .'ing  of  varying 
r;jalities  and  strength  and  of  many  brands  and  tiade  names,  all 
of  which  are  di>tinctly  dilTerent  from  those  of  bla-ting  powder;  and 

\Vui;ri;as,  in  certain  portions  of  the  United  States  the  co-l  of 
selling  said  powder  is  excessive;  and 

Win  KKAS.  for  this  and  other  causes  the  carrying  on  of  bu^ines^ 
ha,  iieen  unsatisfactory  in  the  greater  i)art  of  the  United  States 
to  the  above  named  parties;  and 

WiiKKi:  \s,  it  is  important  that  reasonable  and  uniform  prices 
should  be  maintained,  that  customers  and  the  public  generally 
should  be  relieved  from  the  inconveniences  and  uncertainties  dm 
to  rapid  and  uncertain  lluctuations,  that  unju-t  di.-criminati'ii 
between  persons  and  localities  should  be  avoided,  and  that  con- 
tractors and  other  consumers  should  be  enabled  to  arrange  with 
reasonable  certainty  such  ])ortions  of  their  business  as  are  dependent 
upon  the  acts  of  the  parties  hereto;  and 

\Viii.ri:as,  it  is  therefore  desired  by  all  jiarlii  -  hereto  to  enter 
into  the  agreement  hereinafter  set  forth, 

Now  Tut  Ri  loRi',,  IN  CoNsiDi  R  \ri(iN  of  the  premises,  and  in 
consideration  of  the  one  dollar  and  other  good  and  valuable  coi.- 
siderations  to  each  of  the  parties  by  each  of  the  others  paid,  the 
receipt  of  which  is  hereby  acknowledged;  for  the  pur{)ose  of  regulat- 
ing in  a  convenient  and  desirable  manner  the  business  of  the  parties 
hereto,  in  such  of  their  sales  of  powder  as  are  treated  in  this  agree- 
ment; for  the  jjurposc  of  avoiding  unnecessary  loss  in  the  sale  and 
disposition  of  such  powder  by  ill  regulated  or  unauthorized  com- 
petition and  under-bidding  by  the  agents  of  the  p.irtie-  hereto, 


1! 

I 


Pools   and   Association's 


197 


;ind  lor  ihc  puq/u-c  uf  protiflin^  (;onsunKr>  aiul  tlic  public  from 
unjust  tluctuutiuns  in  \)rku>  and  irom  unju-l  discrimination.--. 

It  is  IIi.KKBY  A(,Ki;i.i)  by  thk  Paktiks  IIikkto  a?.  I-'ullows: — 

I:— That  durinj,'  tlie  Lxi^tunc  jf  this  aj^rt'cment  the  trade  in 
gunpowder  in  and  lhrou;zhouL  all  of  the  United  States  and  its 
'IVrritorie-,  now  or  hereafter  enjoyed  by  each  and  all  of  the  parties 
hereto,  shall  be  subject  to  the  i>ro visions  of  this  agreement,  with 
the  following  three  excei)tions,  vi/.:- 

(i)  Such  trade  as  either  of  said  concerns  constituting  the  parties 
hereto  may  now  or  hereafter  have  in  powder  actually  exported  to 
foreign  countries. 

(2)  Sudi  trade  as  either  of  said  concerns  constituting  the  par- 
ties hereto  may  now  or  hereafter  have  with  the  Government  of  the 
United  States. 

(])  Such  trade  in  Blasting  powder  as  either  of  said  concerns 
constituting  the  parties  hereto  have  in  the  Antliracite  Regions  of 
the  State  of  Pennsylvania.  1  This  trade  having  been  retained  at 
extraordinary  sacrilices  by  the  manufactories  located  within  said 
district,  some  of  which  are  owned  or  controlled  by  certain  of  the 
jjarties  to  this  agreement,  is  to  belong  to  the  jjurties  who  now  enjoy 
it,  and  no  part  of  the  same  i>  to  be  taken  by  or  shared  with  either 
of  the  nine  concerns  la>t  named  in  the  lirst  paragraph  of  this  agree- 
ment). 

The  said  Anthracite  Region^  of  Pennsylvania  are  under.^tood  ami 
agreed  to  be  bounded  and  descriix'd  as  follows:  All  of  Xorthumber- 
Liad  County;  all  of  .Montour  County:  all  of  Columbia  County; 
all  of  Luzerne  County:  all  of  Lack  iwanna  County;  in  Suscjuehatina 
County  the  following  namid  town-'iips,  ClilTord.  Herriik  .iiul 
Ararat;  all  of  \Vayi>c'  County  except  the  townships  touching  on  the 
Delaware  River;'all  of  Carl)on  County:  all  of  Schuylkill  County; 
that  jwrtion  of  Lebanon  County  north  of  the  "Mr-t  Blue  ^blun- 
tain";  and  that  portion  of  Dauphin  County,  north  0:  the  Southern 
boundaries  of  the  townships  01  Rush  and  Middle  Paxton,— bein^ 
practically  that  portion  of  Dauphin  County  north  of  the  '  I'ir-t 
blue  Mountain." 

n  That  that  iiorlion  of  the  United  States,  within  which  the 
reguhition  of  tr.ule  is  contemplated  by  this  agreement,  shall  for 
that  purpose  be  divided  hito  di>tricts  within  each  of  which  unilorm 
prices  shall  generally  prevail,  and  said  "■  Districts"  an  detined  as 
follows: 

First  District:  The  territory  as  follows:  The  New  England  States 


^ 


.f;8 


Indus iKiAi.  (.'i»Mi;iN.\iii)\s  and  Trtsts 


excfjjUn^  ihr  iduiily  ul'  Kuu.ind  in  the-  State  i>\  WTinont,  which 
is  iiuiudcd  witii  thf  SUitc  of  New  "S'^rk,  in  the  Seinrnl  l)i--tritt;  and 
f'xcepliii;^  thai  the  price  for  Hiastin.L,'  powder,  onlv,  at  I'oris  upon 
Lon<,'  Island  Sound,  West  from  Westerly  R.  1.,  inriuded.  ;-hall  l>e 
twenly-live  cents  per  kej^  lower  than  the  minimum  price  for  the 
same  in  the  First  District,  tjenerally:  j)ro\ided  Iiowever.  th.it  >urli 
lower  prii'e  -hall  not  he  made  le>~-  than  the  r(L;u!ar  li>t  jirice  for 
\ew  \'ork  City. 

Second  Dislri,  t:  'i'he  territory  a.-,  follow>:  The  States  of  Xew  \'ork 
'the  County  of  Rutland,  \'t.,  included  thenwilh),  Xew  Jer.sey, 
Tenn^yivania,  Delaware,  Maryland,  We^t  \ir<i!;iia  (e.xcludiii^' 
Bramwell  as  provided  hereinafter),  Ohio.  Itidiana,  Illinois,  and 
those  portions  of  the  States  of  Michiijan  and  Wisconsin  south  of 
the  44th.  i)arallel  of  latitude;  and  the  town-^  on  the  hanks  of  the 
Potom.ic.  the  Ohio,  and  tlie  Mi--.-i~>i|ipi  Kiwr^,  adjoining  said 
territory. 

Third  District:  The  territory  a>  .vs:  'I'iie  Stat<'s  of  .MinncMita. 


[owa,  Missouri,  Kentucky,  Tenn 


ir^inia,  ( ikamwell,  W.  \'a 


to  lie  included  also  in  this  District),  N'orth  Carolina,  and  tho~e 
liortion-  of  the  States  of  South  Carolina,  Georgia.  .■\lai)ama  and 
Missi^-;ipl)i  north  of  the  \\u\.  parallel  of  latitude,  and  also  those 
l)ortions  of  the  State-  of  .Michi.uMn  and  Wi-con-in  north  of  the  44th. 
parallel  of  latitude;  and  also  all  lh.it  p,;;t  of  the  State  of  Kan-a^ 
e.i-t  i.f  the  gSth.  meridian  of  loiiLjitude;  and  the  town-  in  Arkansii-- 
on  the  hank  of  the  Mississippi  ki\er. 

Tourth  District:  The  Territory  as  follows:  The  State  of  Arkansas, 
exceptimi;  the  towns  on  the  hank  of  the  .Mississippi  Ri\iT,  the 
States  of  Louisiana  and  Florida  .md  thu-e  iportiiiiis  of  the  StaU- 
of  Missi.-;sipi)i,  .Mabama,  Georgia  and  South  Carolina,  south  of  the 
3.:?rd.  parallel  of  latitude,  and  al-o  tho-e  portions  of  Dakota  and 
Nebraska  east  of  the  io,^rd.  meridi.m  of  lonj];itudc,  exceptinK  the 
towns  therein  which  adjoin  the  eastern  hound;iries  thereof;  and  aho 
all  the  Stale  of  Kansas,  west  of  the  (),Sth.  meridi.m  <i|  lon^dtude. 

i'iftli  District:  The  territory  as  follows:  The  lndi;in  Territory 
and  the  State  of  Texas. 

Sixth  District:  ''"he  "  Xeutra!  Belt,"  which  consists  of  the  States 
of  Colorado  and  Mont;ina  and  the  Territories  of  Wyoming.  I'tah 
and  X\'w  Mexico,  all  of  the  same;  and  also  those  portions  of  Dakota 
and  Xebraska,  west  of  the  lo.^rd.  meridian  of  longitude. 
_  Snrntlt  District:  .Ml  v{  theSt.ite-^  ,ind  Territories  of  the  Cnited 
States  west  of  the  western  U)undaries  of  the  suiil  "Neutral  Belt", 


I 


Pools   an'd   Associatkjns 


1 99 


which  an;  iiameri  as  fcilluws:  Oregon,  \Va>hin,L;t()n,  Idaho,  Cali- 
tnriiia,  Nevada  ar.d  Arizona. 

111.  I'hat  ol  the  whole  at'irre^ate  trade  of  all  the  concerns  com- 
l)ri>ing  the  jjarties  hereto,  .vhich  is  made  subject:  to  tlii>  .Xgree- 
ment,  division  -hall  b.-  made  among  >aid  parties  in  the  manner 
hercinbelow  ])ro\ided: 

The  yearly  allotments  of  trade  to  the  "Three  Companies"  >hall 
he  to  them  as  one  collective  party,  and  sliall  be  in  >ueh  fiuantitie.s 
of  Sporting  and  Blasting  powder  as  shall  be  equal  to  the  average 
sales  made  by  them  of  said  kinds,  respectively,  for  the  vears  1882, 
iSS.^  and  1SS4.    [Sptg.  200,  7,^"^,  Bl>tg.  0(12,  420.] 

The  yearly  allotments  of  trade  to  the  other  concern.-,  parties  to 
this  Agreement,  shall  be  as  follows: 

Oriental  Pmvdcr  Mills, 

Sporting  powder.  Twenty-four  thousand  two  hundred  and 
twenty-three  (24,223)  kegs. 

Blasting  powrler,  Sixty-tlvo  th.aisand  one  hundred  and  fourteen 
(65,114)  kegs. 

American  Ponder  Mills, 

Sporting  powder,  Thirty-one  thousand  seven  hundred  and  hfty 
(.^1,750)  keg... 

Blasting  powder,  I-'iity-seven  thousand  three  hundred  and  .-.i.\ty- 
six  (57,366)  kegs. 

Austin  Pp',vdcr  Company, 

Sporting  powder,  Fifteen  thousand  five  hun-'red  and  seventv- 
five  (15,5751  kegs. 

i!la-tii-'_r  powder,  Sixty-live  thou-and  (((5.000)  kegs. 

Miiiwi  Pii:rd(r  Company. 

.Sporting  powder,  Kle\en  thou-.ind  four  hundred  lul  lifty-two 
(11,452)  kegs. 

Blasting  powder.  Sixty-six  thousand  five  hundred  and  twenty 
(66,520)  kegs. 

The  King  Powder  Company, 

.Sporting  powder,  Twenty-five  thousand  (25,000)  kegs;  and  be- 
sides these  there  shall  be  a  S|)ei  ial  .MIotment  to  said  Company  of 
Five  Thousand  (5,000)  kegs  of  Sportim;  p.iwder. 


5!^< 


200 


Industrial  Comdixatioxs  axd  Trusts 


Blasting  powder  to  the  same  Company,  One  hundred  thousand 
( 1 00,000 j  ke<^s. 

The  Oliio  Poii'dcr  Cr;:;p(j>!y. 

Blasting  powder,  Sixty  thousand  (()o,cc^,  kegs. 

The  Sycamore  Pou'dcr  Company, 

Sporting  powder,  Eight  thousand  (S.ooo)  kegs. 
Blasting  powdi-r,  Thirty  thou.-and  1,30,000)  kegs. 

The  Lake  Superior  Pou'der  Company, 
Blasting  powder,  Twenty  thousand  (20,000 )  kegs. 

/'//(•  Marcrlliis  Ponder  Company. 

Blasting  powder.  Twenty  thousand  (jo.ooo)  kegs. 

Making  the  total  of  the  sums  which  are  thus  alkjtted  and  taken 
as  the  bases  for  the  division  of  said  trade  to  be: 

Of  SpLfting  powder, 

Of  Bla>tiiig  [X)U(ler, 

(Exeludiiig  the  said  Special  .Mlotment  of  5,000  kegs  of  Sporting 
powder  to  The  King  Powder  Company.) 

It  is  .\i,so  Uncerstooi:)  and  .\(;RF,r,D  That  the  sales  out  of  the 
above  allotments  of  all  of  the  parties  hereto  in  the  following  States 
and  Territories,  viz:  California,  Nevada,  Oregon,  Colorado,  Wasli- 
ington,  Idaho,  .Arizona,  Montana,  I'lah  anri  Xew  Me.xico,  arc  tn 
be  regulated  by  a  certain  sui)pknirntary  .igreement  to  be  entered 
into  between  all  of  the  Cdncurns  eomjiosing  tiie  [..irties  hereto  whh 
the  California  Powder  Works. 

IV.  That  the  aggregate  sales  made  by  all  the  parties  hereto  in 
any  one  ytar  of  Sporting  and  of  Blasting  jjowdcr  .^hall,  for  each 
kind  sei)arately,  l)e  considered  as  a  volume  of  trade  of  certain  valui- 
t.)  be  divided  among  all  of  said  parties  in  dirt-ct  proi)ortion  to  the 
yearly  allotments  to  each  and  by  the  method  hereinbelow  set  forth: 

The  value  of  said  volume  of  trade  shall  be  reckoned  at  the  rate 
of  thirty-five  f-;^)  jier  cent  of  the  list  price  per  keg  for  Sportinu 
pi'wdir,  and  twenty-live  (.'5)  per  cent  of  the  list  price  for  Blasting 
powder,  in  the  "Second  Uistrict";  subject  to  change  as  said  list 
I^rices  may  be  changed ;  said  values  so  reckoned  being  now  for  Sjiort  - 
ing  powder  Sr.75  per  keg  and  for  Blasting  powder  50  cent  .  per  keg. 

The  method  for  determining  the  "li^t  price"  la»t  mentioned,  to 


Pools   and   Associations 


20  r 


1 

3 


used  '  as  the  basis  for  said  adjustment  of  sales  of  cither  of  said 
kinds  of  powder,  shall  he  by  taking  the  averajre  of  the  price>  for 
the  months  of  the  ]H-riod  under  treatment,  (considerinj^  as  a  whole 
month  a  fraction  greater  than  one  half)  as  said  prices  shall  have 
been  t'lxed  in  accordance  with  the  provisions  of  this  apjreement. 

\.  That  the  periods  for  settlement  in  division  of  trade  shall  be 
as  follows: 

The  first  period  ^hall  be,  and  shall  compri>e  the  sales  of,  the 
six  months  -^nding  June  30th,  1S90,  made  by  all  the  partie:^  hereto, 
and  subsequently  the  periods  shall  be  each  comprisinc;  their  sales 
for  twelve  months  and  endinir  June  ^oth.  01  each  year.  And  ad- 
justment of  diflcrences  in  sales  for  said  iirst  periotl  shall  be  upon 
the  basis  of  one  half  of  said  allotments. 

VI.  That  at  the  end  of  each  of  said  periods,  and  within  sixty 
days  thereafter,  each  of  the  parties  hereto  (the  "'I'liree  Companies" 
for  this  purpose  being  considered  as  one  party)  shall  make  up 
separate  sworn  statements  showing  their  sales  of  Sporting  and 
Blasting  powder,  respectively,  made  within  said  periods,  and 
forward  the  same  to  the  Board  of  Trade,  hereinafter  provided  to  be 
established. 

The  Board  of  Trade  shall  consider  separately  the  sales  of  Sport- 
ing and  Blasting  powder  as  the  same  shall  appear  in  said  sworn 
statements,  and  shall  make  computation  of  the  dilTerences  therein 
exhibited;  (By  said  dilTerences  meaning  the  sales  in  excess  or  in  de- 
ficiency of  the  proportions  to  which  each  party  should  be  entitled 
in  the  division  of  trade  as  provided  by  Section  IV.  hereof)  and. 
considering  and  valuing  said  dilTerences,  at  said  rates  per  keg,  for 
the  resi)ective  kinds  of  powder,  shall  make  adjustment  or  clearance 
of  such  dilTerences,  in  money  values,  and  shall  furnish  each  party 
a  written  accounting  in  full  detail,  of  such  clearing  process:  and  the 
same  proving  to  be  a  corret  t  computation,  the  liabilities  of  the 
parties  shall  be  as  thus  determined  and  stated;  and  within  thirty 
(lays  from  th.it  time  each  party  so  made  liable  shall  pay  into  the 
Treasury  such  sum  of  money  as  shall  have  thus  been  adjudged  to 
be  due  from  it.  .\nd  all  of  said  money  thus  paid  into  the  Treasury 
shall  be  distributed  among  the  parties  hereto,  entitled  to  the  same, 
in  sums  to  each  of  them  as  the  same  shall  have  been  determined  by 
said  accounting  of  the  Board  of  Trade. 

VH.  That  in  :iddition  to  the  sworn  statements  to  be  made  at  the 
end  oi  each  of  saiil  periods  as  hereinbefore  provided  lor,  each  of 
*  Thus  in  original. — Ed. 


i 


202 


INDISIKIAI.    ("OMHINATIOXS    A.NU    TrLSTS 


the  parlies  hereto  (the  "Three  Companies"  for  ihis  [)urposc  beinf^ 
con.^idered  as  one  p-.rty1  -h;',!!  at  t!ie  end  of  eacli  (juarter  of  each 
calendar  year,  and  wilhin  liiirty  day<  then-aller,  make  up  state- 
ments which  shall  be  otiniates,  as  nearly  correct  a>  practicable,  ol 
their  sales  of  each  of  said  kinds  of  powder  durini;  said  quarter  and 
shall  immediately  forward  the  same  to  the  said  Hoard  of  Trade 
which  shall  immediately  furnish  each  ol  the  jxirlies  hereto  with  a 
combined  statement  of  all  of  said  sales  during  suul  quarter,  shcnv- 
ing  the  sales  of  each  of  said  i)arties,  of  each  of  said  kinds;  which 
sa?d  comliincd  statement  is  to  be  for  the  guidance  of  each  of  the 
parties;  to  the  end  that  their  sales  may  not,  for  the  wh<ile  of  the 
then  current  period,  be  in  excess  of  their  allotments. 

\TI1.  That  in  all  statements  of  sales  iinnided  by  this  agreement 
to  be  made  and  in  all  adjustments  tlureuiuler,  Sporting  powder, 
whether  sold  in  packages  of  twenty-tive  pounds  each  or  in  pack- 
ages of  other  sizes,  and  whether  of  one  quality  or  another,  shall  be 
considt  ed  and  taken  as  if  the  same  were  all  of  one  quality,  to  wit : 
"Rifle"  (now  so  called  in  the  trade)  powder;  and  shall  be  stated 
in  units  of  twenty-five  pounds  each  and  fractions  thereof,  if  any, 
in  decimals,  and  Blasting  powder  whether  made  oi  nitrate  of  ])otassa 
or  nitrate  of  soda,  shall  be  considered  and  tak(■^  as  if  made  of  last 
named   material. 

IX.  That  in  none  of  the  statements  hereinbefore  provided  to  be 
made  by  the  parlies  hereto  concerning  their  sa'cs  and  for  the  pur- 
pose of 'dividing  the  whole  of  their  tnide  which  is  subject  to  the 
provisions  of  this  agreement  shall  there  be  counted  or  included  any 
sales  of  powder  made  by  any  one  of  them  to  any  other  of  them.  It 
being  intended  that  if  one  party  shall  sell  powder  to  another  such 
powtier  shall  be  counted  only  in  the  sales  of  the  party  who  shall  mar- 
ket the  same. 

X.  That  the  statements  of  sales  made  by  each  of  the  parties  hereto 
for  the  purpose  of  dividing  the  trade  of  the  tirst  i)erio(l  ijanuary 
ist.,-Junc  ,^oth..  i.Sqo)  shall  include  all  the  jiowder  delivered  in  said 
period  though  the  same  may  have  been  sold  previously. 

XI.  That  immediately  after  the  adoption  of  this  Agreement, 
there  shall  be  elected  a  Board  of  Trade,  m>  to  be  called,  consisting  of 
five  members,  and  a  Secretary  and  Treasurer  of  the  same. 

XII.  That  at  all  elections  of  the  memebers  '  of  the  Board  nf  JVadr 
and  of  a  Secretary  and  Treasurer  of  the  same,  v(;tiiig  shall  be  by 
ballot  and  each  of  the  parties  to  this  Agreement  shall  have  one  vote 

'  Thus  in  the  original. — lid. 


Pools    an'd    Associations 


~o.^ 


i[hn>  providing  for  one  vote  by  each  of  the  "'  Thnc  Conipaiiic^") 
ami  a  majority  of  the  votes  so  cast  shall  elect:  jiarties  hereto  not 
present  ul  a  meeting  may  be  represented  by  personal  pnjxy. 


X\"ir.  That  the  15oard  of  Trade  shall  have  power  t(/  fix  prices 
and  to  vary  or  change  the  same  at  any  time  and  for  any  place,  to 
meet  contingencies  and  for  protection  <if  the  common  intere^ts.  It 
shall  have  power  to  enforce  any  rules  and  regulations  which  mav  be 
adopted  by  the  jjarties  to  this  agreement  and  to  take  anv  measure^ 
for  that  |)urpose  which  may  in  its  judgment  be  neces>arv.  It  sliall 
hear  and  adjudge  in  all  cases  of  grievanco.  when  the  partie-  in- 
volved shall  not  be  able  to  agroc  among  tliem>elves. 

The  members  of  the  Hoard  shall  be  re-imbursed  for  all  expenses 
incurred  by  them  in  performance  of  their  duties. 

X\'lll.  That  any  action  taken  at  a  General  Meeting  affecting 
the  rightsof  any  indixidual  concern,  shall  have  the  unanimous  con- 
.'^ent  of  all  the  parties  hereto  to  be  valid  and  of  authoritv:  excepting 
only  in  lialloting  for  members  of  the  Hoard  of  Trade  and  for  the 
Secretary  and  Treasurer  as  hereinbelore,  in  .Section  XII,  ]>ro\i(!i(l. 

XIX.  That  any  General  Meeting  duly  authorized  mav  re\iew  or 
reverse  the  acts  of  the  Hoard  of  Trade  and  instruct  it  upon  anv 
matter.  .\nd  at  any  General  Meeting  when  a  ciuestion  shall  l)e  of 
approval  or  reversal  of  any  previous  acts  or  decisions.  partie>  hereto 
not  llun  pre;'mt  may  have  a  vote  u[)oii  such  (jue^lion  by  pergonal 
proxy  gi\ing  i)ower  thereunto. 

XX.  'I'hat  the  duties  of  the  Sccretar}'  and  Treasurer  >-halI  be  as 
follows:  he  sliall  i>.-ue  notices  for  and  shall  attend  all  Mertint:>  ol 
the  Board  of  Trade  and  all  General  Meetings  of  the  ])ariie>  hereto 
and  shall  keep  a  faithful  record  of  the  proceedings  at  all  such  Meet- 
ings and  shall  send  a  copy  of  the  same  to  each  of  the  parties  hereto. 
And  he  shall  be  the  medium  of  the  communication  between  the 
members  of  the  Board  (jf  Trade  as  wt  11  as  between  all  the  parties 
to  this  agreement  u,  ')n  matters  of  general  concern. 

He  shall  receive  and  disburse  all  moneys  for  expendituri>  in  the 
common  inten.si  n  accordance  with  the  methods  ])rescribe(l  there- 
for and  shall  make  semi-annual  reywrts  to  all  the  parties,  of  such  ex- 
penditures and  of  the  disjiosition  of  all  moneys  coming  to  his  h;inds. 

He  shall  receive  a  salary  of  S.'^oo  per  annum  for  his  services. 

XXI.  That  ail  assessments  of  morcy  for  expenditures  made  or 
to  be  made  for  the  common  interest  shall  be  upon  each  party  in 


304 


I.NDrSTRIAI.    ('(iMIilNATIONS    AM)   TRUSTS 


direct  jiroportinii  a-  it-  allntiiiml  in  number  of  kcir--  nl"  both  kinds 
of  powder  is  to  the  total  of  the  aliotnieiits  to  all  the  i)arlies  in  num- 
ber of  kegs  of  tjDlh  kinds,  (excluding;  said  Special  Allotment  of 
Sportino;  powiler  t.)  The  Rint:;  Powder  (').)  with  exception  only  as 
provided  in  Section  XXII.  hereof.  And  no  obligation  for  the  pay- 
ment of  money  shall  be  incurred,  other  than  for  such  expenditures 
as  are  provided  for  in  this  agreement,  excejjt  the  same  shall  be  done 
at  a  General  Meeting  held  a-^  hereinbel'ore  provided. 

XXII.  Thai  any  party  lurdo  who  shall  sufcr  excessive  loss  by  an 
overt  act  of  llir  Board  of  trade,— as  for  iiislancc  the  reduction  of  a  price 
at  a  place,  in  treatment  of  a  local  disturbance  of  trade, — shall  receive 
compensation  for  the  damage  it  shall  sustain  by  payment  of  money 
as  max  be  ai^rced  upon  at  a  General  Meeting,  on  the  recommendation 
of  the  Board  of  Trade}  And  requisitions  for  money  to  pay  such 
damages  shall  be  made  by  the  Hoard  upon  those  of  the  parties 
who  make  and  sell  that  specific  kind  of  powder  regarding  which 
such  award  for  damages  shall  have  been  settled:  an<l  contributiijns 
shall  be  required  of  them  in  direct  proportion  to  their  allotments 
for  that  specific  kind  of  powder. 

XXIII.  That  all  the  concerns  constituting  the  parties  hereto 
shall  be  and  are  severally  bound  to  each  other  for  the  fulliUment 
of  all  the  obligations  of  this  agreement,  but  no  concern  shall  be 
responsible  for  any  default  of  any  other  concern. 

XXIV.  That  an  Agreement  or  Agreements,  supplementary  and 
auxiliary  to  this,  shall  be  executed  by  all  the  parties  hereto  relating 
to  the  prices  to  be  maintained  for  sales  of  powder,  and  the  general 
harmonious  arrangement  of  the  powder  trade. 

XXV.  That  the  existing  agreements  between  the  twelve  con- 
-erns,  jiartie^  hereto,  and  the  California  Powder  Works,  and 
between  tlu  "Three  Companies"  and  the  other  nine  concerns, 
parties  hereto,  relating  to  the  trade  of  the  "Pacilic  Coast  District" 
and  the  '"Xeutral  Belt"',  shall  continue  with  the  consent  of  all  the 
parties  hereto,  now  expressed;  and  the  consent  thereto  of  the  Cali- 
fornia Powder  Works  shall  be  obtained  if  jiracticable.  New  written 
Agreements  to  be  the  same  in  elTect  as  those  now  existing  shall  be 
made  and  executed,  if  ])ossil)le,  at  an  early  date;  the  same  to  be  co- 
terminous with  this  Agreement. 

XXVI.  That  the  benefits  and  liabilities  arising  from  this  Agree- 
ment shall  extend  to  the  successors  and  assigns  of  each  of  the 
roncerns  comprising  the  parties  hereto  and  to  the  executors  and 

'  Italics  are  the  cdiior'i. 


1 


Pools    and    Asscxiatio.ns  205 

administrators  of  the  members  of  the  firm  i>i  I".  I.  Du  Pont,  (ic 
Xeinours  &  Company,  but  no  concern  shall  be  h'able  for  any  de- 
fault not  committed  by  itseh'  except  as  herein  expressly  specified. 

XXVII.  That  this  .Agreement  shall  bet,'in  tol)e  in  effect  on  the  i?t. 
day  of  January,  iiSgo,  and  shall  remain  in  force  until  the  ,^oth.  day  of 
June,  i>Sq5,  and  shall  continue  in  force  thereafter  from  year  to  year, 
infiefmitely,  so  lonj^  as  none  of  the  concerns  shall  f^ivc  written  notice 
to  all  the  others,  throu^di  the  Secretary  of  the  T5oard  of  Trade,  of  it?, 
intention  to  withdraw  at  least  three  months  i)revious  to  June  :;oth., 
1S95;  but  such  notice  havin;^  been  given,  in  any  year  succeeding  the 
year  iSq4,  this  Agreement  shall  terminate  June  30th.  of  said  year. 

XXVIII.  That  the  .^chaghticoke  Powder  C^mipany,  a  corjiora- 
lion  orgarazed  under  the  laws  oi  the  State  of  Xew  N'ork,  being 
owned  as  to  a  majority  of  its  stock,  and  controlled  by  the  Latlin 
&  Rand  Powder  Company,  it  is  understood  and  agreed  that  all 
of  its  sales  shall  be  con^-idered  as  sales  of  the  Latlin  &  K and  Powder 
Co.,  and  >aid  Lathn  i!v;  Rand  Powder  Co.  hereby  guarantees  that 
said  Schaghticoke  Powder  Co.  will  respect  anil  faithfully  comjjly 
with  all  the  provisions  of  thi>  .\gnement  with  the  .-iame  effect  as 
if  it  had  signed  this  Agreement  as  a  party  liereto  included  under 
the  name  of  the  Lalhn  &  Rand  Powder  Conii)any. 

XXIX.  This  shall  be  called  the  "Fundamental  .Agreement." 

In  Witness  Whereof,  the  concerns  forming  the  ])arties  hereto, 
have  hereunto  set  their  hands  and  alTixed  their  corporate  seals  the 
day  and  year  fjrst  above  written. 

(Signatures) 


E\mi!iT  4 

.-VDDYSTON    riri     PnOLS' 

From  the  minutes  of  the  association,  a  copy  of  which  was  put 
in  evidence  Ijy  the  petitioner,  it  ajipeated  that  jirior  to  December 
28,  i8q4,  the  Anniston  Com])any,  the  lioward-liarrison  Company, 
the  Chattanooga  Comi)any,  and  the  South  Pittsburg  Company 
had  been  associated  as  the  Southern  .Associated  Pij^e  Works.  Upon 
that  date  the  .\ddyston  Company  and  Dennis  Long  &  Co.  were 
admitted  to  membership,  and  the  following  plan  was  then  adopted: 

'  Uttilrd  Slates  v.  Addysion  Pipe  &•  Steel  Company.  85  Fed.  271.  Cf.  pp. 
273  ff.  The  first  of  these  pools  was  to  divide  territory,  the  second  was  an  e.x- 
ample  of  the  so  called  auction  jvotI.  The  case  was  carried  to  the  Supreme  Court 
of  the  United  Slates  and  a  decree  entered  in  favor  oi  the  Government.— Ed. 


1= 


2c6 


Industrial  CoMniNATioss  and  Trusts 


•■Fir-l    The  boiuwc^  on  the  fir-l  oo.ooo  tons  of  pipe  secured 
in  any  territory,  lo"  and  ^mailer,  shall  be  divided  ecjually  amons 
six  shops.     Seconil.     The  bonuses  on  the  next   75,000  tons    30 
and  smaller  sizes,  to  be  divided  among  five  shops,  Soutli  Pittsburf^ 
not  participatinsi.    Third.  The  bonuses  on  the  next  40,000  tons. .:;() 
and  smaller  .M/.e-,  io  be  divided  amonj;  four  shops,  Anni.lnn  and 
South  Pitt-burj^  not  participatinc;.     Fourth.  The  bonuses  on  tlie 
next  is.ooo  tons,  consi>tin};  of  all  sizes  of  pipe,  shall  be  divided 
amonu  three  shops,  Chattanooga,  South  Pittsburg;,  and  Anni>ton 
not  particiixitini,'.     The  above  division  is  based  on  the  lollowing 
tonnajie  of  capacitv:  South  Piltsbur>i.  15,000  tons;  .\nniston  30,000 
tons-  Chattanoof^a',  40,000  tons;  Bessemer,  45-ooo  tons;  Louisville, 
4:;  000  tons;  Cincinnati,  45,000  tons.    When  the  J20.000  tons  have 
been  made  and  shipi)ed,  and  the  bonuses  divided  a>  heremalter 
provided,  the  auditor  shall  set  a>ide  into  a  reserve  fund  all  '"'nu-e^ 
ariNiiu'  from  the  excess  of  shipments  over  220.000  ton>,  and  >liall 
divide"  the  same  at  the  end  of  the  year  among  the  respective  com- 
panies according  to  the  percentage  of  th(   excess  of  tonnage  they 
may  have  shii^ped  (of  the  .-izes  made  by  them)  either  in  pay  or 
free  territory.     It  is  also  the  intention  of  this  proposition  that  the 
bonu^e-i  on  all  pipe  larger  than  30  inches  in  diameter  shall  be  divided 
equally  between  the  .\ddyston  Pipe  &  Steel  Company.  De  nis 
Lon"  &  Co.,  and  the  HowardTIarrison  Company.  ' 

"It  was  thereupon  resolved:  First.  That  this  agreement  shall 
last  for  two  y?;.rs  '.  m  the  dato  of  the  signing  of  same  until  De- 
cember ',1,  iSo6.  Second.  On  any  question  comin,  ofore  the 
association  requiring  a  vote,  it  shall  take  five  affirmative  votes 
thereon  to  carry  said  question,  each  meniber  of  this  a-sociation 
beini'  entitled  to  but  one  vote.  Third.  The  .\ddyston  Pipe  &  Steel 
Company  shall  handle  the  business  of  the  gas  and  water  companies 
of  Cincinnati.  Ohio.  Covington,  and  Newport.  Ky.,  and  pay  the 
bonus  hereafter  mentioned,  and  the  balance  of  the  parties  to  this 
agreement  shall  bid  on  such  work  such  reasonable  prices  as  they 
^hall  dictate.  Fourth.  Dennis  Long  &  Company,  of  Louisville, 
Kv.,  shall  handle  Louisville,  Ky.,  Jeffersonville,  Ind.,  and  New 
.\l'bany,  Ind..  furnishing  al.  the  i^ipe  for  gas  and  water  works  in 
above-named  cities.  Fifth.  The  Anniston  Pipe  &  Foundry  Com- 
pany shall  handle  Anniston,  Ala.,  and  AtlanUi.  Ga..  furnishing 
all  pipe  for  gas  and  water  companies  in  above-named  cities.  Sixth. 
The  Chattanooga  Foundry  &:  Pipe  Work-  >han  handle  Chattanooga. 
Tenn.,  and  New  Orleans,  La.,  furnishing  all  gas  and  water  pipe 


Pools   and   Associations 


in  the  abo'T-namccl  cities.  Seventh.  The  llnw.ml-IIarri.-on  Iron 
Company  shall  handle  Bessemer  and  Hirniin^hani.  Ala.,  and  St. 
]..iuis,  AIo.,  furnishinj,'  all  pipe  for  ^as  and  water  companies  in  the 
above-named  cities;  extra  l)i)nus  to  l)e  put  on  Ka.-t  St.  Loui>,  and 
Madison,  111.,  so  as  to  protect  the  price>  named  for  St.  Louis,  Mo. 
Eighth.  South  Pittsburg  Pipe  Works  shall  handle  Oma'^i.  Xeb., 
on  all  sizes  required  by  that  eity  during  the  year  of  iS()5,  conferring 
with  the  other  companies  and  co-operating  with  them.  There- 
after they  shall  handle  the  gas  and  water  companie>  (tf  Omaha, 
Xeb.,  on  such  sizes  us  they  make. 

"Xote:  It  is  understood  that  all  the  shops  who  are  members  of 
this  association  shall  hamlle  the  busine.-s  of  the  gas  and  water 
companies  of  the  cities  set  apart  for  them  including  all  sizooi  jiipe 
made  by  them. 

"The  following  bonuses  were  ado[)ted  for  the  differenl  ^tates 
as  named  below:  All  raiiroad  or  culvert  pipe  or  pipe  for  any  drain- 
age or  sewerage  purposes  on  12"  and  larger  sizes  shipped  into  bonus 
territory  shall  pay  a  bonus  of  Si. 00  per  ton.  On  all  sizes  below  12" 
and  >hip|)ed  into  'bonus  territory'  for  the  purpo^es  above  named, 
there  ?hall  be  a  bonus  of  $2.00  per  ton. 


i 


.Mabaiiia S3  00 

ii'gham,  Ala.  ...  2  00 

.Anniston,  .Ma.  .  .  2  00 

.Mobile,  .\la.  ...  i  00 

.Arizona  Ter.    .  ,^  00 

California i  00 

Colorado 2  00 

liid.  Ter ,^00 

.North  C I  CO 

Tenn.,  East  of 

C'land 2  GO 

Tenn.,  Middle  and 

West ,)  00 

Illinois,       e.KCcpt 

Madison     and 

East  St.  Louis, 

as     previously 

provided 2  00 


Li.'!l  of  Bonuses 

Wyoming  .  .  .  .  S4 

Oregon 1 

Ohio I 

X.  D 2 

S.  D 2 

Florida i 

Georgia 2 

Atlanta,  Ga..  .  2 
Ga.  Coasts  Pts  i 

Idaho 2 

N^'v 3 

Oklahoma  .   .      3 

Wis 2 

Texas,  Interior  3 
Texas  Coast  .  i 
Wash'ton  Ter.  i 
Michiijan  ....  i 
West  \-a.  ...    I 


CO  Kansas  . . .  .S2  00 

00  Ky 2  00 

50  La ,T  00 

CO  Miss 4  00 

CO  .Mo 2  00 

CO  Montana ...  ,,  00 

00  Nebraska  .  .  3  00 

00  .\.  Mex.  ...  ,3  CO 

CO  S.  C I  CO 

00  Minn 2  00 

00  Utah 4  CO 

00  Indiana  ....  2  00 

00  Iowa 2  00 

00 

CO 
00 

,=;o 
00 


2o8 


Industrial  Combinations  and  Trusts 


"All  other  territory  free. 

"On  motion  of  Mr.  Llewellyn,  the  honu?cs  on  all  city  work  as 
specially  reserved  shall  be  .Sj.oo  per  ton." 

The  states,  for  sales  in  which,  bonuses  had  to  hi-  paid  into  the 
association  were  called  '"pay"  territcry,  as  distinj^'uished  from 
"free"  territory,  in  .vhich  defendants  were  at  liberty  to  make  sales 
without  restriction  anci  without  paying  any  bonus.  The  by-laws 
provided  lor  an  auditor  of  the  association,  whose  duty  it  was  !•> 
keep  account  of  the  business  done  by  each  shop  both  in  pay  and  fri  e 
territory.  On  the  ist  and  i6th  of  each  month,  he  was  required  to 
send  to  each  shop  "a  statement  of  all  '-hii)ments  reported  in  the 
lirevious  half  month,  with  a  balance  sheet  showing  the  total  amount 
of  the  premiums  on  shipments,  the  division  of  the  same,  and  debit, 
credit,  balance  t)f  each  con'pany."  The  system  of  bonuses,  as  a 
means  of  restricting  competition  and  maintaining  prices,  was  not 
successful.  A  change  was  therefore  made  l)y  which  ])rices  were  to 
he  fi.xed  for  each  contract  by  the  association,  and,  except  in  reserved 
cities,  the  bidder  was  determined  by  competitive  bidding  of  the 
members,  the  one  agreeing  to  give  the  highest  bonus  for  division 
•among  the  others  getting  the  contract.  The  plan  was  emljodied 
in  a  resolution  passed  May  27,  1895,  in  the  words  following: 
"Whereas,  the  system  now  in  operation  in  this  association  of  hav- 
ing a  tixed  bonus  on  the  several  states  has  not.  in  its  operation,  re- 
sulted in  the  advancement  'n  the  prices  of  pipe,  as  was  anticipated, 
except  in  reserved  cities,  and  some  further  action  is  imperatively 
necessary  in  order  to  accomplish  the  ends  for  which  this  a.ssociation 
was  formed:  Therefore,  be  it  reM)l\ed,  that  from  and  after  the 
first  day  of  June,  that  all  competition  on  the  pipe  lettings  shall 
take  place  among  tlv  various  pipe  shojjs  prior  to  the  said  letting. 
To  accomplish  this  purpose  it  is  proposed  that  the  six  competitive 
shops  have  a  representative  board  K"  ated  at  some  central  city, 
to  whom  all  imiuiries  for  pipe  shall  be  referred,  and  said  board 
shall  fix  the  price  at  which  said  pipe  shall  be  sold,  and  liids  taken 
from  the  re^jK-clive  shops  for  the  privilege  of  handling  the  order, 
and  the  party  securing  the  order  shall  have  the  protection  of  all 
the  other  shops.'  In  pursuance  of  the  new  plan,  it  was  further 
agreed  "that  all  parties  to  this  association,  having  quotations 
out,  >hall  notify  their  customers  that  the  same  will  be  withdrawn 
by  June  i.  iSo:;.  if  not  previously  accepted,  and  uiwii  all  business 
accepted  on  and  after  June  ist  bonuses  shall  be  tixed  by  the  com- 
mittee."   .\t  the  meeting  of  December  19,  1895,  it  was  moved  and 


Pools   anu   Associations 


209 


carried  that,  upon  all  inquiries  for  prices  from  "reserved  cities" 
for  pipe  reciuired  during'  the  year  of  i8g6,  prices  and  ])onuses  should 
lie  fixed  at  a  regular  or  called  meeting  of  the  jirincipals.  At  the 
meetint;  v)f  December  20,  1S05,  the  plan  for  division  of  bonuses 
i.ri^inally  adopted  was  modified  by  making  the  basis  the  total 
.Mdunts  shipped  into  "pay""  territory  rather  than  the  totals 
-hipped  into  "pay"  and  "free"  territory. 


ExniniT  5 

l.XTRACTS    FROM    THE    CONSTITUTION    AND   BY-LAWS   OF   THE    COAL 


dealers' 


ASSOCIATION   OF   CALIFORNIA 


I 


"Article  i.  Title  and  Object,  (a)  The  title  of  this  organization 
hall  be  the  'Coal  Dealers'  Association  of  California,'  with  prin- 
,  :pal  place  of  business  in  San  Francisco,  (h)  It  '^hall  have  for  its 
ijject  the  furnishing  of  information  to  its  members  as  to  sales  of 
(.lal  made  by  wholesale  dealers  to  the  retail  dealers,  and  by  retail 
dealers  to  consumers,  and  also  the  names  of  any  dealers  who  have 
been  guilty  of  violating  any  of  the  rates  or  rules  nude  from  time  to 
time  by  this  organi/.a'ion,  and  the  furnishing  of  as  complete  a  list 
.H  possible  of  delin(|uent  consumers,  and  such  other  matters  as 
may  be  decided  upon. 

"Art.  2.  What  Constitutes  a  Dealer,  fa)  Any  person  who  en- 
g.iges  in  the  sale  of  coal  as  regular  business,  buying  to  -ell  again, 
who  shall  own  and  operate  a  yard,  keeping  an  otTice,  and  disi)laying 
a  sign,  shall  be  regarded  as  a  retail  dealer,  (b)  All  miners  and 
shipi)ers  shall  be  eligible  to  membershii»  in  this  association,  pro- 
vided such  miner  and  shipjHT  shall  not  make  a  practice  of  selling 
i();d,  at  retail,  at  less  price  than  the  nlail  dealers." 

"Art.  4.  Fees— Dues— Assessments,  (a)  The  admittance  fee  for 
membership  shall  be  two  hundred  (200)  dollars,  and  must  in\ari- 
ably  accompany  the  application,  (b)  The  amount  of  dues  shall 
he  iifty  cents  i)er  month,  payable  quarterly  in  aiKanic,  and  to  date 
from  the  first  day  of  the  month  following  the  month  in  which  the 
member  was  admitted,  (c)  Assessments  may  be  levied  by  a  two- 
thirds  vote  of  the  mc:.'.bcrs  present  at  a  regular  meeting,  but  only 

'  I'ltitrd  Slates  v.  Coal  Dralrn'  A^snriatinn  of  California.  S5  Fwl.  2$!. 
Cf.  |ip.  i-^i  li.  This  (imljinulion  was  oruuni/.i-d  Soptemlter  nth,  i8g6.  by  the 
•■•  'ill  lOiii  dealers  o'  San  I  r.ind^io.  Another  auretiiniU  was  tnteriil  into  hc- 
1  \iLii  this  .\s«  )ci;.ti(m  .ind  Wholtr.ik-  dealers  of  the  -unic  City.  .\  temi)orary 
injunction  aguinsl  this  tombiiiation  was  grunted  hy  the  court.— Ed. 


210 


Industrial  Combinations  and  Trusts 


in  such  cases  when  the  interests  of  the  association  as  a  bu  'ncss 
society  require  it.  (d)  Xo  assessment  shall  be  levied  unles:  it  is 
expressed  in  the  notice  of  meeting  that  'a  resolution  to  levy  an 
assessment  will  be  introduced."" 

".\rt.  0.  Failure  to  Pay  Dues,  Assessments,  or  Fines— Charges— 
Rij^ht  of  Appeal,  (a)  if  any  member  shall  neglect  or  refuse  to 
pay  the  monthly  dues  and  assessment>  as  [)rovided  in  the  consti- 
tution and  (he  by-laws  of  this  association  within  three  days  after 
tlie  same  liave  become  due,  he  or  they  shall  no  longer  be  considered 
numbers  of  this  association,  or  participant  in  its  benefits,  and 
^hall  surrender  certificate  of  membership;  but  a  written  or  printed 
notice  must  be  sent,  at  the  exjjiration  of  said  time,  to  all  tho>e 
members  who  are  delinquent,  and  may  be  reinstated  within  ten 
days  thereafter  by  paying  in  full  all  dues." 

uv-laws 

•        •        • 

''Sec.  4.  Standing  Committees,  (a)  .\  grievance  committee  con- 
sisting of  three  persons  shall  be  appointed  by  the  president,  from 
the  board  of  directors,  <m  the  first  Monday  of  every  nmnth,  to 
serve  without  comi)ensation  until  the  first  Alonday  of  the  fullow- 
ing  month,  or  until  their  successors  are  appointed.  They  shall 
assemble  whene\er  re(|uested  to  do  so  by  the  secretary,  and  re- 
ceive and  investigate  all  charges  of  violation  of  card  rules  or  rates 
preferred  against  any  coal  dealer  or  agent  in  the  city  and  county 
of  San  Francisco,  and  report  their  findings  to  the  secretary.  They 
shall  have  the  power  to  fix  the  time  limit  for  the  payment  of  any 
fines  imi)osed  by  them " 

"Sec.  ().  .\dvertising.  Circulars,  etc.  fa)  Dealers  in  advertising 
coal  are  not  jxTmitted  to  state  prices  without  adding  the  nanus 
of  coal  to  be  had  for  the  prices  named;  both  names  and  prices  to 
correspond  exactly  wilh  those  on  rate  card,  (b)  .\iiy  circulars, 
posters,  dodgers,  cards,  or  signs  conflicting  with  the  card  rates  or 
rules  disi>layed,  found  on  the  streets  or  circulated  in  any  manner 
whatsoever,  shall  subjiet  the  dealer  or  agent,  who  caused  their 
distribution,  to  the  penalties,  as  are  jirovided  in  section  i.^  of  these 
by-laws  for  selling  coal  in  violation  of  card  r.'l'  -  <>r  nilis. 


"Sec.  II.  New  Yards.     Any  member  oi>ening  a  new  yard  (ir 
yards  after  June  14th,  1895.  in  addition  to  the  one  that  secured  his 


Pools   and   Associations 


211 


admission  in  ihc  association,  shall  be  liable  for  an  additional  two 
hundred  (200)  dollars  achr"  nee  fee  and  monthly  dues  for  each 
yard  so  opened,  in  order  Ux  such  yard  or  yards  to  participate  in 
the  benefits  of  the  association. 

"Sec.  12.  Standard  Rules  and  Weights,  (a)  \o  dealer  shall 
Rive  more  or  less  than  100  pounds  to  i  sack;  500  pounds  to  5  sacks, 
or  Ji'  ton  (short);  1,000  pounds  to  10  sacks,  or  32  ^  (.short); 
2,000  pounds  to  20  sacks,  or  i  ton  (short);  2,240  pounds  to  i  ton 
(lon^).  (b)  All  lonR  tons  must  be  delivered  in  bulk.  Names  of 
coal  must  appear  on  bill  exactly  as  they  read  on  rate  card.  .-X  load 
(if  coal  delivered  in  bulk  shall  be  per  ton  of  2.240  pounds.  If 
handled  after  arrival  at  customer's  place,  an  additional  charge  of 
fifty  cents  per  ton  mib '  be  made.  A  ton  of  coal  delivered  in  twenty 
sacks,  and  put  in  bin,  ^hall  be  2,000  pounds.  No  premiums  or 
presents  are  permitted  to  be  oiTered  as  inducements  for  j>urrhasers 
to  buy  coal,  (c)  Dealers  shall  be  permitted  to  sell  and  deliver  fifty 
pounds  of  coal  at  one  half  card  rates  for  one  hundred  pounds,  but 
in  no  case  shall  they  be  allowed  to  sell  coal  in  ciuantilies  ranging 
between  fifty  pound>  and  one  hundred  poun<ls. 

"Sec.  i.v  Violations— Penalties,  (a)  If  a  dealer  or  agent,  mem- 
ber or  non-member,  be  found  j^uilty  of  sellinR  coal  in  violation  of 
the  card  rates  or  rules,  he  shall  be  subject  to  a  fine  of  not  less 
than  ten  (10)  dollars  nor  more  than  one  hundred  (100)  dollars  for 
the  first  offense,  not  les",  than  twenty-five  (25)  dollars  nor  more 
than  two  hundred  (200)  dollars  for  the  second  olTcnse;  if  a  member 
of  the  association,  be  suspended  and  compelled  to  pay  retail  prices 
for  third  olTensc  until  restored  to  •  .embership  in  g(M)d  standing 
by  the  board  of  directors.     . 

IvMIIIlIT    f) 
STRUCTURAL  STF.F.L  ASSOCLVTION  OF  Till,   UNITED  ST.ATFS  ' 

This  agreement,  made  and  entered  into  this  ist  day  of  January, 
|S()7,  bv  and  between  the  Passaic  Rolling  Mill  Co.,  Putts\  ille  Iron 
&  Steel' Co.,  .\.  &  P.  Roberts  Co.,  Cambria  Iron  Co..  Phoenix  Iron 
Co..  New  Jersey  Steel  &  Iron  Co.,  Universal  Construction  Co.,  the 
Carn.git  Steel  Co.  (Ltd.).  Cleveland  Rolling  Mill  Cn  ,  Jones  & 
Laughlin  Steel  Co.  (Ltd.*, 

'  I'ttited  SliUc^  of  Amrrira  v.  United  States  S/rW  Ctirfioratinn.  Ptlilion,  In 
Om-  Circuil  Cimrl  of  thi'  United  Stales  for  the  UisiriLl  of  New  Jorscy,  L.'whibit  H, 
pp.  7O-8J. 


^ 


212 


Industrial  Combinations  and  Trusts 


Witnesscth  that  thi.  '   -aid  parties  have  mutually  apirced  to 

and  with  each  other  to  form  an  association  to  be  known  as  the 
Structural  Steel  Association  of  the   L'nited  States. 

First.  V-ach  of  the  above  parties  named,  beinj:;  manufacturers  and 
sellers  of  steel  I  beams  and  channels  of  sizes  not  less  than  3  inches  ''n 
depth,  shall,  by  reason  <jf  such  manufacture  and  sale,  be  entitled  to 
membership  in  this  association,  and  each  of  the  parties  hereto  shall 
\)v  entitled  to  such  portion  of  all  sales  by  parties  hereto  of  I  beams 
and  channels  of  sizes  not  less  than  3  inches  in  depth  (exce[)t  I  beams 
and  channels  for  use  in  car  construction  and  deck  or  l)ull)  beams) 
as  is  allotted  to  it  under  the  following  tal>le: 

Per  cent. 

The  Carnegie  Steel  Co.  (Ltd.) 40  _^ 

Jones  &  Lauf;;hlin  (Ltd.) 12   J 

A.  &  P.  Roberts  Co 1 1   J 

Passair  Rollins  Mill  Co 6 

Phoeni\  Iron  Co 5 

Cambria  Iron  Co 5 

Universal  Construction  Co 4  j 

Pottsville  Iron  &  Steel  Co 7, 

Cleveland  Rolling  Mill  Co.  .  3 


I 


100 


It  being  understood  that  members  of  this  association  luiving 
bridge  works  wherein  beams  and  channels,  as  covered  by  this  agree- 
ment, are  consumed  shall  nport  to  this  association  all  shipments  to 
such  de|)artmints  and  i)ay  the  agreed  pool  tax  as  hereinafter  pro- 
vided on  shijiments  so  made  (except  such  as  are  used  in  the  con- 
struction of  buildings  for  their  own  respective  works  which  tonnage 
shall  he  re[)orted  and  credit  given  therefor). 

Second.  The  officers  of  this  association  shall  be  as  follows:  .A 
president,  a  treasurer,  a  commissioner  and  an  executive  committee, 
consisting  of  three  members  (the  president  being  a  member  of  the 
executive  committee,  ex  ofllcio). 

Third.  Each  member  of  this  association  (the  New  Jersey  Steel 
&  Iron  Co.  excejjtefl),  shall,  on  or  before  the  loth  day  of  Februar>-, 
iSq7,  and  on  and  before  the  loth  day  of  each  and'  every  n-.onlh 
thereafter,  during  the  terms  of  this  agreement,  or  any  extension 
fh'Teof.  render  to  the  commissioner  of  thi>  a^^ocialinn,  a  '^•alement, 
which  statement  shall  be  sworn  to  or  aflirmed  to  by  one  of  the  prin- 


Pools   and   Associations 


213 


cipal  executive  officers  of  the  member  so  makini,'  the  report,  or  in 
case  the  member  so  makinj;  the  re[)ort  is  a  cojiartnershii),  then,  in 
that  case,  the  report  shall  be  sworn  to  or  alTirnied  to  by  one  of  the 
lirm  holdinji;  membershii)  in  ihis  association  which  oath  or  affirma- 
tion shall  l)e  to  the  effect  that  the  report  so  made,  is  a  true  and 
correct  report  of  all  the  material  described  in  the  first  clause  of  this 
agreement  which  was  shipped  by  the  member  makinj^  the  report 
during'  the  month  for  which  the  report  is  made;  the  form  (  f  (he  ri 
port  and  oath  or  affirmation  as  to  its  correctness,  shall  be  furnished 
iiy  the  commissioner.  And  upon  the  commissioner's  receiving  from 
the  respective  members  their  reports,  as  aforesaid,  he,  the  comniis- 
-ioner,  shall  render  to  each  member  monthly,  as  soon  as  possible 
.  iiir  the  receipt  of  all  the  statements  of  all  the  meml)ers,  cojjies  of 
-latements  last  rendired  !)y  each  member,  and  shall  forthwith 
••Mate  an  account,"  charj^ing  each  member,  who  has  shii)ped  during 
the  montli  more  than  its  or  their  percentage  of  the  total  am;junt 
snipped  by  all  the  members  of  the  association,  the  sum  >)l  five-tenths 
cents  p.er  pound  on  each  and  every  pound  of  such  excess  and  credit- 
ing each  member  who  has  not  shi])ped  its  or  their  percentage  of  the 
total  amount  shi!)i)ed  by  all  the  members  of  the  a>sociation  with 
the  >um  of  five-tenths  cents  per  pound  on  each  and  every  pound 
which  it  or  they  fail  to  ship  during  the  month  for  which  the  reports 
are  made,  as  aforesaid,  and  as  a  basis  of  calculation  in  making  such 
"statement  of  account,"  the  commissioner  shall  use  the  table  of 
I'.ercentages  as  set  forth  in  the  first  clause  of  this  agreement. 

.\nd  upon  the  statement  of  such  ace  >unt  by  tlie  commissioner,  he 
shall  immediatelv  mail  a  copy  thereof  to  each  member  of  this 
association  and  w'ithin  ti\e  days  after  the  receii)t  of  any  account  by 
the  member  of  this  association,  which  account  shall  show  that  the 
niemljer  receiving  the  same  is  indebted  to  the  association,  the  mem- 
ber so  receiving  it^  or  their  account  showing  its  or  their  indeiited- 
ness.  shall  forward  to  the  treasurer  a  check  or  sight  draft  drawn  to 
the  order  of  T.  Mellon  &  Sons,  in  payment  of  such  indebtedness, 
which  check  or  sight  draft  the  treasurer  shall  deposit  in  the  said 
T.  Mellon  &  Sons'  bank  to  the  credit  of  this  association,  and  im- 
mediatelv uj)on  the  treasurer  receiving  from  the  members  all  their 
respective  remittances,  in  payment  of  their  indebtedness  to  the 
association,  for  any  month,  he,  the  treasurer,  shall  notify  the  re- 
sjnTtive  members  whom  the  aforesaiil  "account  stated"  shall  show- 
to  be  creditors  of  the  association  for  any  month,  to  draw  on  him 
tthe  treasurer)  for  the  amount  due  to  them  as  shown  by  said  "ac- 


2  14 


IXDrSTKIAl.    CoMHINATIONS    AND    TRUSTS 


count  slaU'd."  and  uijon  ruccipt  ol  ihcir  several  drafts  so  maiie  the 
t n-asurtT  shall  accept  the  same  payment  at  '1'.  Melk.n  &  Sons',  and 
charire  the  amounts  thereof  to  the  fund  created  by  the  ]>ayments 
made  hv  the  members  who  shipi)ed  in  excess  of  their  proportion 
during  the  moiitli  for  which  the  "account  stated"  was  made, 
thus  closing  that  account  each  month. 

Kourili.  'I\)  insure  thi-  rendering  of  the  statements  and  llie  settle- 
ment of  the  balances  due  between  the  members  of  this  association, 
at  the  time  required  by  the  provisions  of  this  agreement,  each  mem- 
ber (the  New  Jersey  Steel  &  Iron  Co.  excepted)  shall,  immedial.  ly 
after  the  signing  of  this  agreement,  remit  to  the  treasurer  its  or 
their  chi\k  or  sight  draft  for  the  >um  of  S2.500,  and  shall,  on  or 
before  the  loth  day  of  each  month  thereafter,  .  mit  its  or  their 
check  or  sight  draft  for  S500,  the  said  checks  or  sight  drafts  shall 
be  made  in  favor  of  T.  Mellon  &  Sons,  who  shall  become  the  depos- 
itory of  all  the  jiroceeds  of  such  checks  or  sight  drafts,  which  shall 
form  a  guaranty  fund  and  be  held  by  said  T.  Mellon  &  Sons  during 
the  continuance  of  this  agreement,  or  any  extension  thereof,  and 
disposed  of  tinallv  as  hereinafter  provided. 

It  being  understood  that  when  the  said  guaranty  fund  reaches 
the  sum  total  of  S45.000,  th.at  the  paymi'nt-  toward  said  fund  shall 
thereupon    cease. 

I'ifth.  Whereas  i.  has  been  agreed  by  and  between  the  several 
other  members  and  the  New  Jer-ey  Steel  &  Iron  Co  that  the  works 
of  the  said  Xew  Jersey  Steel  &  Iron  Co.  shall  remain  inoperative  in 
the  manufacture  of  I  beams  and  channels,  of  sizes  coming  under  the 
provision  of  and  during  the  life  of  this  agreement,  in  consideration 
of  which  the  New  Jersey  Iron  and  S.teel  Co.  shall  receive  from  this 
association  the  sum  of  S'5,000  per  month.  Said  sum  of  $5,000  to  be 
paid  by  the  several  otht  r  members  in  proi)ortion  to  their  allotments 
as  shown  by  the  table  in  the  first  clause  of  this  agreement.  On  the 
tenth  day  of  each  month  the  treasurer  shall  draw  at  sight  on  the 
respective  parties  to  this  agreement  for  the  proportionate  amount 
of  the  indebtedness,  and  when  all  such  drafts  shall  have  been  paid, 
he  shall  immediately  notify  the  New  Jersey  Steel  &  Iron  Co.  to 
draw  upon  him  at  sight  for  the  sum  of  S.q.oco.  thus  closing  this 
account  each  month.  In  case  any  draft  which  the  treasurer  shall 
make,  as  in  this  clause  provided,  shall  not  be  i)rompUy  jviid,  the 
amount  of  such  draft  shall  be  taken  from  the  (leiM)sition  the  guar- 
antee fund  of  the  party  failing  to  pay  such  draft,  and  payment 
made  to  the  New  Jersey  Sin!  iV  Iron  Co..  the  .same  as  if  all  such 


J 


l'(JOl.S    AND    AssueuTio.Ns 


21 


-i 


drafts  of  the  treasurer  has  been  paid,  and  such  party  shall  in  me- 
diately remit  to  the  treasurer  an  amount  sufficient  to  make  good  the 
sum  so  taken  from  the  {guarantee  fund.^ 

Sixth.  Whereas  it  has  heen  agreed  by  and  between  all  the  mem- 
bers of  this  association  (the  New  Jersey  Steel  &  Iron  Co.  excepted) 
to  exempt  all  members  except  the  Thoenix  Iron  Co.,  to  the  extent 
of  5  [Jer  cent  of  ,500,000  tons,  in  the  proj)ortions  expressed  in  the 
table  of  allotments  contained  in  clause  1  of  this  agreement:  the 
aforesaid  Phoenix  Iron  Co.  to  be  exempted  to  the  amount  of  i  i.ooo 
tons;  the  pool  assessment  shall  not  be  charged  on  any  memi)er's 
shipments  until  it  or  they  shall  have  completed  il-nr  their  rjuotu  -'  of 
exempted  tonnag;'. 

Seventh.  It  is  required  that  all  I  beams  and  channels  shipped 
into  the  States  bordering  on  the  Pacific  coast  and  to  be  actually 
u-^ed  in  the  territory  into  which  it  is  shipped  and  also  all  I  beams  and 
channels  actually  exported  for  use  outside  the  limits  of  the  United 
States  be  reported  to  the  commissioner  together  with  bills  of  lading 
or  other  evidence  of  exportation  satisfactory  to  him  (said  eviflence 
to  be  conlklcntial  and  not  to  be  circulated  among  the  members). 
Such  tonnage  will  be  deducted  from  the  member's  report  and  the 
agreed  pool  tax  charged  on  the  balance. 

Eighth.  Upon  receiving  the  written  request  of  any  one  member 
of  the  association  the  commissioner  shall  call  a  meeting  of  the 
parties  to  this  agreement,  to  be  held  within  the  days  from  the  date 
of  his  receiving  such  written  re(|uest. 

Ninth.  If  at  any  time  any  of  the  parties  hereto  ~hall  have  reason 
to  supj)ose  that  any  other  jKirty  or  parties  to  the  agreement  have 
violated  any  of  the  provisions  of  this  agreement,  the  said  |;arty  so 
supposing  the  agreement  has  been  violated  shall  liie  with  the  com- 
missioner of  he  association  a  l)ill  of  complaint  against  the  party 
or  |)artics  so  suspected  of  such  violation,  which  bill  of  comj)laint 
shall  fully  set  forth  the  act  or  acts  complained  of,  together  with  all 
the  matters  or  things  connected  therewith.  The  said  bill  of  com- 
plaint shall  be  in  writing  and  shall  furnish  all  the  evidence  that  can 
lie  submitted  in  connection  with  the  alleged  violation,  and  upon 
receipt  by  the  commissioner  of  any  and  all  bills  of  comi)laint  as 
aforesaid,  he  shall  forthwith  use  his  best  offices  to  have  the  accu-^er 
and  accused  arrive  at  an  amicable  .settlement,  failing  in  which,  he 
shall  submit  all  the  information  he  may  have  to  the  executive  com- 

'This  sentence  i.^  thus  in  the  "jrJKinal. — Ed. 
'Thus  in  the  original. — Ed. 


2  I  6 


Industrial  Combinations  anu  Trusts 


mittce  for  action.  If  the  said  executive  ccjmmittee  sliall  (Ktermine 
lliat  the  char<:;es  have  Ix'cn  sustained,  they,  the  executive  com- 
mittee, shall  impose  a  penalty  not  less  than  Si,ooo,  nor  mure  than 
the  amount  standing  to  the  credit  of  he  nn.mher  so  pu'iished  in 
the  ;];uaranty  fund  at  the  time  the  tine  is  inipn>r(l  upon  tiie  [.arty  so 
adjudced  as  having  violated  the  agreement,  i>ut  it  the  execuli\e 
committee  shall  determine  that  the  charges  have  not  been  sustained 
they  shall  dismiss  the  complaint  from  further  consideration  i)y 
them.  It  l)ein<i  furllier  understood  and  a.ijreed  that  no  memt)er  t;f 
the  executive  committee  sliall  act  upon  any  hill  of  com[)laint  made 
by  or  made  against  the  member  of  the  association  which  he  repre- 
sents, nor  shall  any  rei)resentative  of  a  member  of  the  association 
vote  upon  any  bilfof  complaint  brought  by  or  brought  against  tin- 
member  of  the  association  which  he  represents.  .\ny  penalty  im- 
posed by  the  executive  committee  will  i)e  collected  by  the  treasurer, 
deducting  the  amount  thereof  from  the  depo'-it  made  i'V  the  mem- 
ber against  whom  the  penalty  is  imi)o>ed  to  the  guaranty  fund,  as 
provided  for  in  clause  fourth  of  this  agreement,  within  two  weeks 
after  such  yienalty  is  thus  imposed,  the  sum  thereof  shall  be  trans- 
ferr;d  pro  rata  as  per  allotments  to  the  accounts  of  the  members 
of  the  association,  excluding  the  memlur  against  whom  the 
penalty  is  imposed,  by  the  treasurer  )f  the  association,  in 
which  case  the  nieml)er  so  punished  shall  immediately  remit  an 
amount  sufficient  to  make  good  the  sum  taken  from  the  guaranty 
fund. 

In  case  the  offending  member  should  appeal  to  the  a>-ociation 
and  the  action  of  the  executive  committee  should  not  be  sustained 
by  a  majority  vote  of  said  association,  then  the  t'me  imposed  >hall 
be  remitted  and  any  sum  that  the  member  may  have  paid  into  the 
association  by  reason  of  this  shall  be  returned. 

Tenth.  No  member  of  this  association  (the  New  Jersey  .Steel  \' 
Iron  Co.  excepted)  shall  make  any  huni)-sum  bid,  nor  shall  they  or 
it  erect  any  building,  directly  or  indirectly.  This  applies  only  io 
members  as  '"  Rolling  Mills."  .\ny  question  arising  as  to  the  inter- 
pretation of  this  clause  sh.ill  be  rt'ferru!  to  the  commis-^ioner  i^r 
his  immediate  decision. 

Eleventh.  No  C()n>ideration  in  the  nature  of  brokerage  or  com- 
mission is  to  be  allowi-d,  e.\cef)t  to  the  accredited  agents  of  the 
jurties  to  this  agreement,  whose  names  shall  be  on  tile  with  the 
conmiissioner;  and  in  no  case  will  it  in  permissible  for  such  com- 
misf.ion  to  be  divided. 


Pduls    and    ASSUCIAIIUNS 


217 


No  sales  or  contracts  shall  be  made  to  or  with  middlemen  except 
on  speciilc  work  l\)r  immediate  Npecitications. 

All  sales  between  parties  to  this  agreement  shall  he  at  jiool  prices, 
as  provitled  in  agreement  "B,"  and  all  shipments  shall  be  re[)orted 
by  the  manufacturer,  an  which  the  pool  tax  will  be  charged  the 
same  as  to  outside  p;'-ties,  the  purchaser  also  to  report  shi])ments 
of  all  such  material  ^o  bought,  for  which  they  shall  claim  and 
receive  credit. 

Twelfth.  .\t  any  meeting  of  the  members  of  this  association, 
called  by  the  commissioner  as  herein  pro\i(ied.  any  party  or  parties 
may  give  notice  of  wiilulraw.d  herefrom.  IjuI  no  ^uch  n(jtice  shall 
take  effect  until  January  i,  i.s-jS.  If  the  aggregate  pool  percent- 
ages of  the  parties  giving  such  notice  of  will.drawal  shall  amount 
to  less  than  4  per  cent,  this  agreement  shall  continue  in  force  as 
between  the  remaining  jxirties,  but  if  such  aggregate  shall  amount 
to  4  per  cent  or  more  this  agreement  shall  terminate  at  the  time 
so  fixed.  But  -tatements  shall  continue  to  be  rendered  of  all  I 
beams  and  channels  shipped  up  to  date  of  its  termination,  the 
pool  assessment.' 

Thirteenth.  The  percentages  of  the  parties  hereto  or  of  their 
successors  (including  as  such  any  concern  mainly  owned  or  con- 
trolled by  any  of  the  said  parties  or  any  of  their  stockholders), 
shall  be  maintained  in  the  same  relative  proportion  until  other- 
wise agreed,  and  if  any  jiarty  shall  at  any  time  have  more  than  one 
successor  or  allied  concern,  the  aggregate  percentages  allotted  to 
itself  and  all  its  successors  and  allied  concerns  ^hall  not  exceed 
the  percentage  lh:il  thi'  original  concern  would  have  been  entitled 
to  if  it  had  continued  alone  its  relations  to  the  other  parties  under 
thi>  agreement,  and  the  i)arties  thereto  shall  include  in  their  state- 
ment the  shipments  for  such  successors  and  allied  concerns. 

Fourteenth.  In  case  other  firms  or  corporations  are  admitted  a>. 
partners  to  this  agreement,  the  percentage  of  the  pool  allotted  to 
each  shall  be  de<lucted  pro  rata  from  the  [lercentages  of  the  members 
immediately  prior  to  the  time  of  its  adniission;  and  in  case  any  of 
the  parties  hereto  or  any  of  the  parties  hereafter  admitteil  shall 
withdraw,  the  percentage  of  the  pool  allotted  to  such  withdrawing 
party  or  parties  shall  be  added  pro  rata  to  the  |)ercentages  of  the 
parties  remaining.  In  such  case  the  commissioner  shall  compute 
and  report  the  new  percentages  to  the  nearest  one-hundredth  of 
one  per  cent,  which  degree  of  accuracy  shall  be  deemed  sufficient. 
'  This  sentence  is  thus  in  the  origindl. — Ed. 


2l8 


Industrial  CoiiBiNATiONS  and   Irusts 


Fifteenth.  The  allotment  herein  made  of  percentages,  the  amount 
of  the  guaranty  fund,  and  the  payment  made  to  the  \e\v  Jer.-ey 
Steel  &  Iron  Co.,  as  herein  provided,  shall  not  be  altered,  amended, 
or  chanji;ed  in  any  respect,  except  by  the  unanimous  consent  of 
all  the  parties  to  this  agreement,  but  any  other  matters  or  thinj^s 
whatsoever  which  concern  thi>  a<rreement  or  the  association  formed 
thereby  or  any  regulations  hereafter  adopted,  may,  at  any  time,  be 
abrogated  or  amend'^d  or  altered  at  any  meeting  oi  the  members 
of  this  association,  provided  that  two-thirds  of  the  members  of  the 
association  are  present  thereat,  that  they  represent  at  least  two- 
thirds  of  the  percentage  allotted  to  all.  and  vote  in  favor  thereof. 

Sixteenth.  To  [)rovide  for  the  jiromjU  i>ayment.  of  all  salaries, 
rents,  and  other  expenses  (except  the  ])ayment  which  is  to  lie  made 
monthly  to  the  New  Jersey  Steel  &  Iron  Co.),  a  general  ex[)enM' 
fund  shall  be  called  in  as  needed  by  the  treas  .i  <■  in  proportion  tu 
the  i)ercentage  allotted  each  member  in  the  association. 

Seventeenth.  No  matter  of  account  or  understanding  outside  of 
this  agreement  shall  affect  the  settlements  herein  pr.)vi(led  for. 
either  as  an  offset  or  otherwise,  nor  shall  any  written  or  unwritten 
agreement  of  the  parties  hereto,  or  any  of  them,  to  estal)lish  and 
maintain  uniformity  in  prices,  or  any  controversy  arising  out  of 
such  agreement,  or  any  failure  to  carry  out  any  of  its  provisions, 
or  to  maintain  prices,  alTcct  in  any  way  the  rendering  of  the  state- 
ments and  the  making  of  the  settlements  therein  required. 

Eighteenth.  Whenever  this  agreement  shall  liave  been  termi- 
nated the  balance  of  the  deposit,  with  accumulated  interest,  remain- 
ing in  the  hands  of  the  treasurer  to  the  credit  of  each  party,  after 
provision  shall  have  been  made  for  the  payment  of  all  exjienses, 
shall  be  returned  to  it,  provided  it  shall  have  rendered  all  the  state- 
ments refjuired  from  it  under  this  agreement  and  have  paid  all  it-, 
debtor  balances.  In  case  any  party  hereto  shall  not  have  fultilled 
its  money  obligations  under  this  agreement,  the  amount  it  has  on 
deposit  in  the  guarantee  fund  shall  be  applied  toward  the  fuirill 
ment  of  those  obligations,  and  the  excess,  if  any,  returned  to  il. 
But  in  case  any  party  shall  not  have  fult'illed  its  agreement  to 
render  the  monthly  statements  under  this  agreement,  the  amount 
it  has  on  depor-il  in  the  guarantee  fund,  or  the  excess  thereof,  as 
above  stated,  shall  be  divided  among  the  parties  who  shall  ha>e 
fulfilled  their  obligations  under  this  agreement,  in  the  proportion 
of  their  re-;i)ective  percentages. 

Nineteentli.  At  the  expiration  nf  tlii>  agreement,  or  at  any  time 


Pools  and  Associations 


2U) 


I 


i 


the  prisidfiU  of  the  a^ocialion,  together  with  llie  niajorit)-  of  the 
executive  committee,  determine  that  it  is  advisable  that  all  or  any 
part  of  any  funds  belonRin2:  to  the  association  shall  he  withdrawn 
from  the  depository  then  holdinjj;  the  same,  u[)on  notit'ication  by  the 
present  and  a  niaj(}rity  of  the  executive  committee  of  such  deter- 
mination beinj;  j^iven  the  treasurer,  he,  the  treasurer,  shall  make  and 
sifin  a  sij^ht  draft  or  check  upon  the  depository  so  holding;  such  funds 
f(ir  the  >um  named  in  such  notilication,  which  check  or  sif^ht  draft 
shall  then  bccounter>iiined  bythe  president  or  one  memberof  the  ex- 
ecutive committee,  and  when  such  checks  or  sif^ht  drafts  are  so  made 
and  signed  by  the  treasurer  and  countersigned  by  the  president  or 
one  member  of  the  executive  committee  and  duly  presented  for  pay- 
ment at  the  ofTice  of  the  dejwsitory  holding  the  funds  of  the  associa- 
tion,all  such  checks  and  sight  drafts  shall  be  i)aid  bysuchdepository. 

Twentieth.  For  all  purposes  of  this  agreement  a  ton  shall  be  taken 
;ind  held  of   2,000  pounds. 

In  witness  whereof  the  parties  hereto  have  signed  tliis  agreement 
the  day  and  year  first  above  written. 

EXJIIBIT   7 
THE   STEF.I.   riATl     ASSO(  I  \lION' * 

Tins  Agreement,  made  and  entered  into  this  ninth  day  of  No- 
vember, icjoo,  by  and  between: 

Carnegie  Steel  Company. 

Jones  &  Laughlins,  Limited. 

Illinois  Steel  Company. 

Crucible  Steel  Company. 

Otis  Steel  Company. 

Tidewater  Steel  Comjiany. 

Lukens  Iron  &  Steel  Conii)any. 

Worth  Bros.  Company. 

Central  Iron  &  Steel  Comjiany. 

The  .Xmerican  Steel  &  Wire  Company. 

The  Glasgow  Iron  Comjiany. 

WITNESSETH:  That  the  above  said  jiartie^  havt-  mutually  agreed 

to  and  with  each  other  to  form  an  .\ssociation  for  mutual  interests, 

and  to  enable  them  to  pay  liberal  wages  to  their  workmen,  to  be 

known  as  The  Steel  Plate  Association  of  the  United  States. 

'  Untied  StaUs  of  America  v.  United  Stales  Steel  Corporation.  PL-tit  Ion,  Ex- 
il)it  A,  pp.  70-75. 


220 


IXDUSIKIAI,    ("OMBINATIOXS   AM)     TRUSTS 


First:  Each  dl  llu-  parties  ahoM'  naiiud  \iv\ng  manufaclurcr.sani! 
sellers  of  steel  plates,  shall  by  reason  of  such  manufacture  and  sale, 
be  entitled  to  membership  in  this  Association  and  each  of  the  par- 
ties hereto  shall  be  entitled  to  portion  of  all  shipments  in  the  lollow- 
ing  proportions: 

Carnegie  Steel  Company 46.25 

Jones  &  Laughlins,  Limited 4.75 

Illinois  Steel  Company i i.oo 

Crucible  Steel  Comi)any  of  America 4.50 

Otis  Steel  Company. 2.50 

Tidewater  Steel  Company ^.00 

Lukens  Iron  &  Steel  Company 7.50 

Worth  liros.  Company 7.00 

Central  Iron  &  Steel  Company 8.00 

American  Steel  &  Wire  Company 5.50 

Glasgow  Iron  Company  t(j  the  extent  of  sales  and  out- 
put up  to  40,000  t(jn^,  should  they  be  able  to  accom- 
plish them,  prior  to  December  31st,  iqoi. 

Second:  The  officers  of  this  .\ssociation  shall  be  as  follows:  a 
President,  a  Treasurer,  a  Commissioner  and  an  Executive  Com- 
mittee consisting  of  six  members,  including  the  President.  The 
conclusions  of  all  the  Executive  Con.,.iittee  meetings  shall  lu-  at 
once  communicated  to  all  members  of  this  Association. 

TiiiRu:  Each  member  of  this  Association  shall,  on  or  before  the 
tenth  day  of  December,  1900,  and  on  or  before  the  tenth  day  of 
every  month  thereafter  during  the  term  of  this  Agreement,  or  any 
extension  thereof,  rentier  to  the  Commis.-^ioner  of  this  Association, 
a  statement,  which  statement  shall  be  sworn  to,  or  affirmed  to,  by 
one  of  the  principal  Executive  officers  of  the  member  so  making  the 
re])ort,  or  in  case  the  member  so  making  the  re])ort  is  a  co-i)artner- 
shij),  then,  in  that  case,  the  report  shall  be  sworn  to,  or  afiiimed  to, 
by  one  of  the  firm  holding  membership  in  tliis  Association,  which 
oath  or  afi'irmation  shall  be  to  the  eiTect  that  the  report  so  made, 
is  a  true  and  correct  report  of  all  the  material  described  in  the  First 
Clause  of  this  Agreement,  which  was  shipj)ed  by  the  member  mak- 
ing the  report  during  the  month  for  which  the  rcj:)ort  is  made;  the 
form  of  the  report,  and  oath  of  affirmation  as  to  its  correctness,  shall 
be  furnished  by  the  Comn.issioner,  and  shall  include  a  statement  of 
the  rolling  production  for  each  month;  and  upon  the  Commissioner's 
receiving  from   the  respective   members   their  reports,  as  afore- 


1^ 


Pools  and  Associahoxs 


!2I 


said,  he  the  Commissioner,  shall  render  to  each  member  monthlv, 
as  soon  as  possiMe  after  the  receipt  of  ail  the  statements  of  ail 
the  members,  copies  of  statements  last  rendered  by  each  member, 
anci  shall  forthwith  "State  an  Account,"  charKJni;  each  member] 
who  has  shipped  during  the  month  more  than  its  or  their  percentage 
of  the  total  anidunt  shi]>pe(l  ],y  all  the  members  of  the  Association, 
the  sum  of  Thirty-five  hundredths  of  a  cent  (.,^5cl  per  pound  on 
each  and  every  pound  of  such  excess,  and  cred'ilinK  each  member 
who  has  not  shipped  its  or  their  percentage  of  the  total  amount 
shipped  by  all  members  of  the  Association,  with  the  sum  of  thirly- 
tive  hundredths  of  a  cent  (.35c)  per  pound  on  each  and  every  pound 
with  which  it  or  they  fail  to  ship  during  the  month  for  which  the 
reports  are  made,  as  aforesaid,  and  as  a  basis  of  calculatior.  making 
such  "Statement  of  Account,"  the  Commissioner  ^liall  use  the  ta- 
ble of  percentages  as  set  forth  in  the  First  Clause  of  this  Agreement; 
and  upon  the  Statement  of  any  such  account  by  the  Commissioner, 
he  shall  immediately  mail  a  copy  thereof  to  each  member  of  this 
Association,  and  within  live  days  alter  the  receii)t  of  any  account  by 
the  member  of  this  Association,  which  account  shall  show  that  the 
member  receiving  the  same  is  imiebted  to  the  Association,  the  mem- 
ber so  receiving  its  or  their  account,  showing  its  or  their  indebted- 
ness, shall  forward  (o  the  Treasurer  a  check  or  sight  draft  drawn  to 
the  order  of  T.  Mellon  &  Sons,  in  payment  of  such  indebtedness 
which  check  or  sight  draft  the  Treasurer  shall  deposit  in  the  said 
Mellon  &  Sons'  Bank,  Pittsburg.  Pa.,  to  the  credit  of  this  Associa- 
tion, and  to  remain  to  the  credit  of  the  member  paying  on  excess 
of  shipments  and  being  increased  or  diminished  as'each  month's 
business  shows.  It  shall  be  the  right  and  privilege  of  each  member, 
who  shall  not  have  shipped  his  full  percentage,  to  call,  through  the 
Commissioner  on  members  who  have  made  an  excess,  to  transfer  to 
the  short  member  a  sufficient  amount  of  tonnage,  or  otherwise 
enable  him  to  fill  up  his  order  book.  It  being  the  intent  of  this 
Agreement  hat  each  meml)er  shall  shifi  his  entire  i)ercentage,  and 
at  the  end  01  each  year  it  shall  be  the  duty  of  the  Comnii->iV)ni  r  to 
'^o  arrange  between  the  members  as  to  haw  the  pool  balanced;  but 
any  member  unable,  at  the  end  of  each  year,  to  produce  his  allot- 
ment, after  first  deducting  his  exempted  tonnage;  which  shall  be 


po'il,  in  [troportion  to  their 


divided  among  other  members  'if  the 
rl•^pective  tonnage  allotments. 

Fourth:  To  inr^ure  the  rendering  of  the  statements  and  the  faith- 
ful adhererce  of  each  part}-  to  the  terms  (;f  this  .Agrcnien* ,  a  guar- 


2* 
1 


222  Industrial  Combination.^  and   Trusts 

antce  fund  of  $100,000  shall  l)c  formcu  by  tht-  payment  on  or  before 
Deceniln'r  ^rii.  1000.  of  Si.ooo  f<jr  each  jier  cenl.  of  allDtnieiU,  as 
proviilc<l  lor  in  ihc  1-  irsl  Clause  of  this  Agreement  to  the  I'reasurer, 
which  fund  >hall  be  (h'pd-ited  or  inve-ted  a^  directed  by  tlie  Execu- 
tive Committee  in  tru>t  for  the  members,  in  the  same  proportion 
as  received.  Subject  however,  to  such  forfeiture  or  ])enalty  as  may 
be  declared  by  a  vote  of  the  remainder  of  the  members  ajiainst  any 
member  violating  the  terms  of  this  Agreement,  as  hereinafter  pro- 
vided . 

I-"uin:  W'lii.Ki  \s,  it  has  been  agreed  by  and  bet  ween  ail  the  mem- 
bers of  this  Asr-Kiation  to  exempt  certain  tonnage  to  cover  orders 
already  taken,  ii  is  agreed  that  such  exemption  shall  !)e  as  follows: 

Carnegie  Steel  Company 1 40.000  t'.>ns. 

Joiu-  iv  Laughlin>,  Limited i),4co 

Illinois  Steel  Company 'Sv^M 

Crucible  Steel  Company  of  America.  .  .  -".OSj 

Otis  Steel  Company i  ,740      " 

Tiilewater  Steel  ("(mijiany     -.520      " 

Luken-  Iron  \-  Steel  Company .v77'*^ 

Worth  H,o>.  Coinp.iiiy     ,^'Sb3      " 

I'he  .\meri(an  Steil  iv  Wire  Company  ivii6      " 

Glasgow  Iron  Company 7-Q''.i 

It  is  understood  tliat  tbo-.  who  hold  cxcniption-  imdir  thi>;  agree- 
ment arelo  pro])ortiontlu  -hipnn  nt-  applyingtotlu  m  in  monthlyal- 
lotment>, bet  ween  the  date  of  thi>  .\greement  and  January  i-t,  iyo2, 
and  such  -hipnunts  shall  not  bi'  subject  to  the  pool  assessment. 

Sixth:  It  i>  re(|uired  that  all  plates  shipped  into  the  states 
bord'  ring  on  the  I'acilic  Coa-t,  and  to  be  actually  u>ed  in  the  ter- 
ritory into  which  it  i^  shipind.  and  abo  all  ]>lates  actually  exported 
for  use  out>ide  the  limits  of  thi  United  Stales,  l)e  reported  to  the 
Commissioner,  together  with  Hills  of  Lading,  or  other  evidence  of 
e\i>ortation,  for  ai  tual  use  abroad,  sati-^factory  to  him  (>aid  evi- 
dence to  lie  contidential  and  not  to  In  lircuhiteij  among  the  mem- 
bers.) Such  tonnage  will  be  deducttd  from  ilu  nu mlur's  report, 
and  the  agreed  |)ool  tax  charged  on  tin   balaine. 

SiCVi.NTli:  Upon  receivin"  the  written  re<|uest  of  two  mt  mbers  ot 
the  Association,  .stating  the  object,  the  Commissioner  shall,  upon 
th-:  approval  of  the  Lxecutive  Committee,  call  a  meeting  of  tne 

Earties  to  this  agreement ,  to  be  held  frorn  live  days  frv)ni  date  of 
is  receiving  such  written  request. 


Pools  and  Associations 


^^3 


EiGiiiii:  II  at  ,!P.y  time  an_\  "f  ihi- parti.>  hereto  shall  have  reason 
to  --uppuse  that  any  other  party  or  parties  to  the  Agreement  ha\'j 
Niolated  any  of  the  provisions  of  this  Afireement,  the  said  i)arty  so 
supposing  thc'Agreement  has  been  violated,  >hall  lile  with  the  Com- 
nii.~-ioncr  of  the  Assoeiation,  a  Bill  of  Complaint  against  thr  [)arty 
or  i)arties  so  su.~pected  of  .such  violation,  which  liill  of  Complaint 
-haU  fully  set  forih  the  act  or  acts  complained  of,  together  with  all 
the  matters  or  things  connected  therewith;  the  said  liill  of  Com- 
plaint shall  l)e  in  writing,  and  shall  furnish  all  the  evidence  that 
(,in  he  submitted  in  connection  with  the  alleged  violation,  and  upon 
receipt  by  the  commissioner  of  any  and  all  Bills  of  Com[)laint,  as 
aforesaid,  he  shall  forthwith  use  his  best  olEces  to  have  the  accuser 
and  accused  arrive  at  an  amicalile  sftt'ement.  failing  in  which,  he 
-h.dl  then  submit  all  the  information  he  may  have  to  the  Kxeeutive 
Committee  for  action;  ii  the  said  Executive  Committee  shall  d"ter- 
niine  that  the  charges  have  been  sustained  they,  the  Executive 
Committee,  shall  impose  a  ]>enalty  of  not  less  than  One  Thousand 
Dollars,  nor  more  than  the  amount  staniiing  to  the  credit  of  the 
member,  so  punished,  in  the  (iuarantee  Fund  at  the  time  the  t'ine  is 
imposfv!  upon  the  party  so  adjudged  as  having  violatid  the  Agne- 
ment,  but,  if  the  Evecutive  C'ommittee  shall  dilermine  that  the 
charges  have  not  l)een  sustained,  they  shall  dismiss  the  conijilaint 
from  further  consideration  by  ilmii.  It  i-  furtlur  understood  and 
agreed  that  no  member  t.f  the  Executive  Conunillee  s!;,dl  act  upon 
an-  Hill  of  Coniplaint  made  l)y,  or  made  against  the  member  of  the 
A-Mieiation  which  he  represents  nor  shall  any  ripresentative  of  a 
member  of  the  Association  vo*e  upon  any  Bill  of  Complaint  brought 
by  or  brought  against  the  member  of  the  Association  he  represents. 
Any  penalty  imposed  by  the  Executive  (\)nimittee  will  be  coHected 
by  the  Treasurer,  deducting  the  amount  iherifrom  the  deposit 
made  ijy  the  member,  against  whom  the  penalty  is  impo-t  d.  t.)  the 
(iu.irantee  Fund,  as  |)rovide(I  for  in  Clause  Fourth  of  this  .Agree- 
ment, within  two  wetks  after  such  penally  i-  lliii>  im[)os(d.  the 
s'lm  thereof  shall  l)e  transfemd  pro  rata  as  pt  r  allotments  to  the 
a((  )unts  of  the  members  of  the  A.ssociation  excluding  the  n'ember 
against  whom  the  penalty  is  impt)sed,  by  the  'Irea surer  of  the 
Association,  in  which  case  the  member  so  punished  shall  immedi- 
ately renn't  an  amount  sutTicient  to  make  good  the  sum  taken  from 
the  Guarantee  Fund. 

In  case  the  offendmg  member  shall  appeal  to  the  .\ssnriation  and 
the  action  of  the  Executive  Cumniiitce   hall  not  be  su.stained  by  a 


Ai> 


^''\ 


2  24  Industrial  Comiunations  a.nu  Trusts 

maiority  vole  of  the  members  of  the  said  Association,  then  the  fine 
impo^Ld  shall  he  remitted,  and  any  sum  that  the  member  mav  have 
paid  into  the  Association,  by  reaso    of  this  >hall  he  returned. 

XiMir  No  consideration,  in  the  nature  of  brokerage  or  com- 
mi*s^ion,  .-.hall  be  paid  to  any  one  on  sales  of  plates,  on  or  alter 

lanuarv  ist,  iqoi.  . 

Ml  sule^  between  parties  to  thi.  A^^reen.ent  -lial!  be  a.  pool  pncc> 
as  provided  in  Agreement  "B,"  and  ail  .hipnunls  shall  be  reported 
by  the  manufacturer,  on  which  the  pool  tax  will  be  charges  the 
same  as  to  outside  parlies,  the  purchaser  al^o  to  report  shipments 
of  all  such  materials  so  bought,  for  uhich  they  ^hall  claim  and  re- 
ceive credit.  r    ,  •    4         •  .•  n    1 

Ti-NTir  Many  meeting  ni  the  member-^  of  this  Association,  ealle.l 

l,v  the  Commissioner,  as  hereir,  provided,  any  ivirty.  or  parties  may 
give  three  months  notice  of  withdrawal  herefrom  but  no  such  n*.- 
tice  shall  take  enVct  prior  to  January  ist,  looJ.  Statements  shall 
continue  to  be  ren.kred  of  all  plates  shipped  up  to  <late  of  such  with- 
drawal, the  pool  assessment  to  be  charged  th.-reon. 

Fleventh:  In  case  other  firms  or  corporations  are  admittec  a> 
parUier^^  to  this  Agreement,  the  ]>ercentage  of  the  pool  all-tul  to 
lach  <hdi  be  deducted  pro  rata  from  the  percentages  01  the  nuni 
ber'^  immediately  iir^or  to  the  time  of  its  admi-u.n;  and  m  case  anv 
of  the  parties  hereto,  or  anv  of  the  parties  hercalter  admitted  sliail 
withdraw,  the  percentage  of  the  pool  alloted  to  such  withdrawing 
p-,rtv  or  iKirtics  shall  be  added  pro  rata  to  the  percentages  ol  the 
piirties  remaining.  In  such  case,  the  Commi.-Moner  shal  c^ompute 
',nd  report  the  new  postages  to  the  nearest  one  hundredth  of  oni' 
per  cent.,  which  degree  of  accuracy  shall  be  deem  d  suluciem. 

Twi  LiTir.  The  Agreement  herein  made  of  percentages,  tfic 
amount  of  the  Guarantee  Fund  a<  herein  i)royid '(land  the  Ag.ee- 
ment  to  maintain  minimum  iked  rates  as  covired  in  Agreement 
'•li"  shall  not  be  altered,  amended  or  changed  in  any  respect,  ex 
cept  by  the  unanimous  consent  of  all  parties  to  this  agreement. 
TiliRTi  iNVli:  To  provide  for  the  prompt  payment  of  all  ^ahiries, 
rents  and  otner  expenses,  a  general  expense  fund  shall  be  railed  m 
as  needed,  by  the  Trea-^urei;.  in  proportion  to  the  percentage  alloted 
each  member  of  the  \-<ociat  ion. 

FouRTlFNTii:  No  matter  of  accovnt,  or  under'^tandintr  ont'^ule 
of  this  Agreement,  shall  alTect  the  settlements  lurein  proM  L.d  fnr 
tilher  us  an  olTsct  or  otherwise,  nor  shall  any  unlten  or  unwritten 

'  Thus  in  original.— Ed. 


Pools  and  Ass(jciAriuNS 


225 


aj;rccmcnt  of  the  parties  hereto,  or  any  of  them  establish  and  main- 
tain uniformity  priees,  or  controversy  ari-in;,'  out  of  any  such  agrei- 
ment  or  any  failure  to  carry  out  any  of  it-  provisions  or  to  maintain 
prices,  affect  in  any  way  the  renderinj^  of  the  statements  and  the 
making  of  the  settlements  herein  rcc|uirid. 

FlFTM'.Mii:  Whenever  this  Atrrerment  shall  have  been  termi- 
nated the  balance  (<f  the  depo.-il,  with  accumulated  interest,  remain- 
ini;  in  the  ham!'^  of  tlie  Tna-urer  to  the  cndit  of  each  part}-,  aftir 
provi-ion  shall  ha\e  been  n;ade  for  the  payment  of  all  e\penMS,  -hull 
be  returned  to  it,  pro\  ided  it  shall  have  rendered  all  the  statements 
re(juired  from  it  under  this  Agreement,  and  ha\  e  jiaid  all  its  debtor 
lalances.  In  case  any  party  hereto  shall  not  ha\  e  full'illed  its  money 
iil)ligali<jns  under  this  agreement,  the  amount  it  has  on  deposit 
in  the  (niarantee  Fund  >hall  be  api)lied  toward-  the  fulfillment  of 
those  obligations,  and  the  execs-,  if  any,  returned  to  it.  Hut  in 
ca^c  ■  ny  party  shall  not  have  full'illed  i'ts  agreeuK  nt,  the  amount 
it  has  on  deposit  on  '  the  (iuaranlte  Fund,  or  the  excess  thereof,  as 
above  stated,  shall  be  divided  among  the  parties  who  shall  have 
fuhilled  their  oi)ligations  under  this  agreement  in  the  jiroportion  of 
their  resjU'Ctive  percentages. 

SiXTKi-:NTn:Forall  |)urpose  '  of  thi- contract, a  ton -hall  betakm 
and  Iield  as  Two  Thousand  Found-,  (j.coo). 

In  witnkss  wiiiiKior  the  above  partit-  have  signed  this  Agree- 
ment the  (lav  and  xiar  fir.-t  abo\e  written. 


Iauiiui   .S 

liV-IAWS    (il      I  Hi      !  ASTKRN    ST.MKS    RITAIL 
LLMlii-k    Dl.VI.l.R-    ASSDCIAriON  - 


.Xkikii    I. 
Xdinr  iiiiil  tirrilory. 

The  name  of  this  organization  shall  be  the  Kastcrn  States  Retail 

1. umber   Dealer-    .\'^-ociation,  and  the  territory  embraced  by  it 

1  bt   th.it  ((iMTed  by  the  association  admitted  to  member-hip. 

'  riiiis  in  original.-  IM. 

'United  Stiilci  of  Amirifa  v.  The  F.iulfrn  States  Retail  l.umhrr  nr,ilrr<:  As- 
sociation. OriRinaf  Pclition.  In  the  Cinuil  Court  of  the  I'nilcd  St.itrs  for  the 
Southern  District  of  Now  \drk.  I-Ahihit  .\,  pp,  70-7,}.  This  Associalion  was 
'ri;ani/.ed  at  New  Haven,  Conn.,  in  September,  lyoi.  -  Ed. 


226 


LnUUSIRIAL   CoMIUXAlIUNS   AND   TrUSIS 


Ariiclk  II. 
Objects. 

The  objects  of  this  association  shall  ho  t(.  promote  and  footer  a 
unity  of  action  in  all  matters  jHrtainini;  to  the  legitimate  conduct 
of  the  retail  lumber  trade,  to  encourajj;e  friendly  relations  between 
the  several  associations  who-e  members  are  members  of  this  associa- 
tion, to  correct  abuses  and  irregularities  from  which  the  trade  suf- 
fers.'/o  srcHi-c  and  Jissrniiiuitr  any  and  all  proper  information  for  the 
niulual  lonnnicnce,  benefit: or  proteelion  of  its  membership.^ 

Arikii.  III. 


Kesiriet'ons. 
rcjulatinn-,  nr  liN-law<  ^li.d 


\<i  rule-,  re-julatinn-.  or  ii> -law-  -lull  be  adopt'-'  which  will  in 
any  manner  stille  c  unpetilion.  limit  i)roduction.  rej^ulate  prices, 
res'train  trade,  or  pro\  ide  for  the  poolin-j  of  prol'il-;  no  coercive 
measures  shall  be  practiced  or  adopted  toward  any  n  tailer  or  whole- 
saler; nor  shall  any  discriminatory  practice-,  on  the  part  of  this 
association  be  used  or  alhnved  af^ainst  any  retailer  <.r  wlioK-aler 
for  the  reason  that  he  may  or  may  not  be  a  member  of  any  as-ocia- 
tion,  and  no  promises  or  aj^reements  of  an>  kind  shall  l;e  requiMte 
to  membership  in  this  association  other  than  those  contained  in  this 
constitution,  nor  -hall  any  penalties  bt  imposed  fr.r  any  cau-e  what- 
soever. 

Officers. 

Section  i.  The  ofTiccrs  of  this  association  shall  consist  of  a  presi- 
dent, vice  preMdeiit,  secretary,  who  shall  al-o  act  as  treasurer.  wh.> 
shall  be  elected  by  ballot  at  each  annual  meetinp.  and  with  two 
other  members,  who  shall  also  be  elected  at  each  ;  nnual  meeting, 
shall  consiitute  the  board  of  directors,  and  a  majority  of  the  votes 
cast  shall  be  necessary  to  a  choice.  All  otTicers  shall  hold  oitue 
until  their  successors  arc  duly  elected  and  ciualilied.  _Xo  otlicer 
shall  have  fiower  to  make  or  enter  into  any  contract,  oblijiation.  or 
agreement  on  behalf  of  the  association  until  such  contract,  obliga- 
tion, or  agreement  shall  have  been  submitted  to.  and  received  tlie 
indorsement,  ai)i)roval,  or  sanction  of  a  majority  of  the  mcmbcr- 

'  Italics  are  the  editor's. 


Pools  axd  Associations 


227 


I 


! 


ship.  Xo  otfucr  '^hall  obliirate  the  association  for  any  expenditure 
of  money  al)ove  llie  suni  of  S25  withuut  the  approval  of  a  majority 
vote. 

Sec.  2.  Until  the  first  annual  meetintj  the  vice  president,  secre- 
tary, and  treasurer  need  not  be  members  of  the  board  of  directors. 

.Artici  I.  y. 
Duties  oj  qificcrs. 

Hath  otficcr  of  the  association  :hall  perform  the  duties  usually 
devolving  upon  the  occupant  of  such  office.  It  shall  be  the  duty  of 
the  secretary  to  perform  such  labors  or.  behalf  of  the  association  as 
he  may  be  called  upon  in  the  interim  between  meetings  and  to  carry 
out  all  matters  upon  which  actinii  ha>  l>een  taken  in  meeting,  un- 
less otherwise  ordered. 

.Vrtici.i.  \'1. 

}[ciiin(is. 

The  association  shall  hold  \\\n  rrcjular  meetinp;?  each  twelve 
months,  the  annual  mcetinfj  on  the  t'ir>t  Wednesday  in  October,  in 
the  city  of  New  \'ork,  and  the  second  meetint;  at  such  time  and 
place  as  may  be  cKtermined  upon.  Special  nucting.-  niav  \iv  called 
i)y  the  president  when  considered  neces>ary,  or  wluiuvi  r  1 'k  repre- 
>entatives  of  the  three  a.-^sociations  shall  unite  in  asking  tjiat  -uch 
a  meeting  l)e  called.  Xotices  of  all  meetings  ^h:>JI  be  givin  to  the 
members  of  this  a.ssociation  at  !ea-t  five  days  before  the  date  set  for 
such  meeting. 

.\RTI(M      \  II. 

.]f(»:l)trslt!p. 

Skction  1.  The  members  of  this  association  shall  be  composed  of 
three  member>,  one  of  whom  >h.dl  l)e  the  M'cretarv  oi  eadi  of  the 
following  associations:  The  \ew  \"ork  Lumber  Trade  Associativ)n, 
the  New  Jersey  Lumbermen's  Protective  .Association,  the  Lumber 
Dealers'  Association  of  Connecticut,  the  LuiuIkt  Dealers'  Associa- 
tion of  Rliode  Island,  tlie  Massachusetts  Retail  Lumber  Dealers" 
.Association,  the  Ret.iil  Lumbermen's  .\ssociation  <if  Thiladelphia. 
and  of  three  meml)ers,  one  of  whoin  shall  be  secretary  of  such  other 
ri'guiarly  organized  bodies  representing  the  nlail  lumber  dialers' 
interests  as  .shall  l)e  elet  ted  by  a  majority  vote  at  any  regular  meet- 
ing of  this  association. 


vi-v 


228 


IXUUSTRIAI.    ("OMIUN.MIONS    AND    TRUSTS 


Sec.  2.  All  mcmbtrs  shall  enjoy  vqual  privilcf^os  except  that  upon 
the  tmal  vote  on  all  (lue^ti()n-~  ami  at  elections,  and  on  amendments, 
shall  be  decided  under  the  unit  rule,  the  three  meniijers  of  each 
association  hein.n  entitled  to  only  one  vote  for  such  three  members, 

Articli.  \III. 

Committrvs  and  dt!r<^atrs. 

Whenever  action  may  re(iuire  the  a[>])ointmcnt  of  committees  to 
perform  sriecial  work,  or  necessity  calls  for  the  appointment  of  a 
delegate,  or  delejiates,  the  president  shall  be  authorized  to  notify 
the  menibtr^  of  this  as>ociation,  stating  in  writing  the  object  for 
>uch  appointment,  and  ui^m  receiving  a  majority  vote  favorable 
thereto  he  shall  ha\e  iiowir  to  act  in  the  nuikint,'  of  such  appoint- 
ment as  he  niay  deem  proper. 

AKrici.i:  IX. 

Sc'llrmoi!'^  i'<  (l;s[>idcs. 

.\ny  and  all  claims  referred  to  tl;is  association  for  'settlement 
shall  be  >ubniitt<(l  in  writing  utile:.-,  otherwise  deeided,  with  -uch 
accompanying  dot  unientary  evidences  as  the  partie-  thereto  may 
consider  necosary,  and  all  parties  interested  mu>t  a<^rec  to  accept 
the  de>ci.sion  of  this  association  as  tinal. 

Artictk  X. 

l:.\pi  ,iscs. 

To  meet  the  expenses  incurred  by  this  association,  an  annual 
fee  of  Sio  sh;  11  i' •  paid  by  the  members  of  each  association  jointh' 
It  the  annual  meeting,  and  all  other  expenses  shall  bv-  pro  rata, 
based  on  the  amount  received  from  amiual  dues  for  the  previous 
year  by  the  association  of  which  they  are  members. 


— -^ Articli.  XI. 

1  mcndmmlsT' 

.\mendment.>  to  these  articles  may  be  made  at  any  meetuiK  by  a 
two-thirds  vote  of  the  members  present,  provided  notice  of  such 
amendment  shall  !ki\c  beeM  itKliidid  in  tiie  call  for  tlie  lueetiiii;. 


FoOI.S    A.NU    AS.SOCIATIOXS 


229 


! 


Artici.i    XII. 

Quonon. 

A  quorum  of  this  organiz-ulion  for  thi'  transaction  of  business 
shall  consist  of  not  less  than  one  of  ihc  members  of  three  of  said 
associations. 

l\\iiUiH  I) 

N AV At    STORKS    ACRKKMr.XT  ' 

Memorandum  of  agreement  made  and  executed  on  this 

dav 
( 


March. 


.\.    I).    IOCS,    between    the    rAlTl.RSON-DoWNiNG 

iMPANV,  a  cori)oration  of  Wot  Virj^dnia,  of  the  first  part,  hercin- 
iiter  called  "Patterson";  the  S.  V.  Siii)T1i:r  Companv,  al-o  a  orpo- 
Mtion  of  West  Virginia,  of  the  second  jKirt,  hereinafter  called 
"Shotter"';  the  SociKir.  .Xno.w.mf.  di.s  rudiHiTS  Rksimax.  a 
enrporation  of  the  Kin<idom  of  Belgium,  of  the  third  part,  herein- 
. liter  called  "Anonyme";  Xickoll  &  Knight,  a  merca.ntile  firm 
c^>mposed  of  .Mi'xander  Kni,L;ht.  of  the  city  of  London,  Kngland,  t)f 
the  fourth  part,  heninaltiT  called  •' Xickolls"';  and  the  Gloiu'.  Xa- 
VAL  Stores  Company,  al-o  a  corpor.ition  of  West  Virginia,  of  the 
filth  part,  hereinafter  called  "(iLOHK." 

Whereas  Cdobe  is  chartered  ami  organized  for  the  ynirpose  of  buy- 
ing and  selling  and  generally  di'aling  in  sjjirits  of  turi)enline,  includ- 
ing turpentine  chemically  extracted  by  artitkial  proces>  from  pine 
wood,  and  which  is  commonly  called  wood  tur|)entine;  and 

Whereas,  Patterson.  Shotter.  .\nonyme.  and  Xii  kolls  as  a  part  of 
their  respective  business  severally  deal  in  such  turpentine  product; 
and 

Whereas,  further  the  said  Patterson.  Shotter,  .Xnonyme.  and 
Xickolls  have  each  sevendiy  subscribed  to  the  cajiital  stock  of  said 
(ilobe  in  the  following  proportions,  vi/.: 

P.itterson  to  ^4'  ,   thereof,  or  ,:;40  shares; 
Shotter  to   21-,' v',    thereof,  or   jis   shares; 
Anonyme  to  2t-}4%  thereof,  or  jd;  -hares; 
Nickolls  to  iS'~^   thereof,  or  i.So  sh.ue-; 

'  The  United  States  of  Amcriai  v.  .1  mrriniii  Xavnl  Stores  Company  c!  <;/.  Pe- 
tition in  r.quitv,  In  the  District  {"ourl  of  the  L'nitcci  States  for  the  Kastcrn  Divi- 
sion i.{  t'.i'.'  Siiithcrn  District  of  Ceorjiia,  i:xhil)il  .\.  pp.  25-3'!.  In  thi.s  ea.sc  the 
<ili>l)eXavalSt()ris(.:oni|.ar.y''ppearsfr(im  theaKreement.andsotliedovernmcnt 
allows,  to  be  nuTily  a  clearing  house  for  the  pouilr.g  of  protjts  .md  losses.— Ed. 


il 


2XO 


Txin'STKIAL    COMlilN" ATIONS   AN'D    TrUSTS 


all  of  said  sliares  boinK  of  the  f)ar  value  of  t'lfty  dollars  (•'^50)  ]>it 
sliarc;  and 

Whereas,  Globe  desires  to  acquire  from  the  first,  second,  third, 
and  fourth  parlies,  respecti\'ely,  tlu'ir  ->e\-eral  turpentine  l)usine^■•es, 
and  said  lirst,  second,  thirtl,  and  fourth  parlies  are  willing  to  disj)ose 
of  the  same  on  the  terms  and  conditions  hereinal'ter  set  forth;  and 

Whereas,  the  said  Patterson  and  Shotier  are  extensive  dealers  in 
American  rosin,  and  one  of  the  considerations  movinj;  them  to  enter 
into  this  contract  is  the  rejiulalion.  of  llie  ro.Mn  business  as  between 
themselves  and  the  said  Anonyme  and  Xiclcolls: 

Now,  then,  this  apreenii.  lit  v,■itnes^elh,  That  in  consideratiiMi  of 
the  premises  and  of  one  chiilar  by  each  of  said  jiarties  to  each  of  the 
other  in  han<l  paid,  the  receijjt  whereof  is  hereby  acknowledged,  the 
parlies  hereto  mutually  covenant  and  a^ree  each  with  the  others 
as  follows: 

1.  The  said  Patterson,  ShottiT.  Anonyme,  and  Xickolls  severally 
sell,  assi^'n,  and  set  over  to  (liobe  their  re-pective  turpentine  busi- 
nesses upon  the  terms  and  subject  to  the  limitations  hereinafter 
mentioned. 

2.  The  said  Globe,  in  consideration  of  such  sales  and  assif^n- 
mcnts.  agrees  to  pay  to  Patterson.  Shotter.  Anonyme.  and  Xickolls, 
respecli\'ely,  seventeen  thousand  dollars  (."^17,000).  ten  thousand 
seven  hundred  and  fifty  dollars  (,?io,75oi,  th.irteeii  thousand  two 
hundred  anil  fifty  dollars  181.^^50),  and  nine  thousand  dollars 
(Sq,ooo),  in  full-paid  stock  at  par  of  the  Globe  Company. 

i,.  It  is  undi-rstood  and  ajxrivd  that  said  Patterson,  Shotter, 
.\nonyme.  and  Xickolls  shall  se\'erall\'  act  a>  the  a.izents  and  repre- 
sentatives of  said  Globe  in  the  buyint:  and  sellin.^;  of  tur])enline 
products,  their  >evend  turjientine  businesses,  however,  liein^  con- 
ducted as  hiretofore  in  their  own  names,  but  for  account  of  Cilobe. 

.).  It  In  imder-tood  and  a;,Teed  that  James  Parie,  jr.,  ui  .'^avannah, 
Georgia,  is  undiT  contract  to  Xickv)lls  whereby  his  entire  na\al 
stores  business  shall  be  carried  on  as  heretnfore.  that  is  to  '-ay.  the 
turpentine  business  of  the  said  Parie  shall  be  conductrd  by  him  for 
account  (jf  Globe,  and  the  rosin  business  for  the  joint  account  of 
Patterson  and  Shntu  r,  ii  beins^  expressly  understood  that  tlie  --aid 
James  I'arie,  jr.,  and  .\ndrew  Farie,  also  of  Savamiah,  Georj^ia, 
shall  have  no  inlerot  of  any  kind,  either  directly  or  indirectly,  and 
shall  not  in  any  manner  or  form,  deal  or  operate  in  spirits  of  turpen- 
tine or  rosin  or  other  ])rodiicts  of  pine  trees,  except  as  provided  in 
said  contract,  a  copy  of  which  is  attached  hereto,  and  in  considera- 


Pools  and  Associations 


-'31 


i 


tiun  ui  the  premises  Xickulls  lurt'hy  assign-  all  Uu'ir  riplus  in  and 
uhiIlt  said  contract  to  Gloljc,  and  on  the  other  hand,  Globe  hereby 
takes  the  place  of  Xickolls  in  said  contract  and  assumes  all  the 
burtlens  and  obligations  thereunder  and  shall  be  entitled  to  all 
benefits  thereof,  provided,  however.  th.;;t  Globe  shall  not  be  re- 
(■|uired  by  reason  of  said  contract  to  pay  t'l  the  >aid  James  larie, 
jr.,  a  sum  greater  than  twenty-one  thou-ar.l  ii\e  hundred  .ioliars 
(Sj  1,50c)  per  annum,  it  being  further  understood  that  said  .\ickolls 
shall  contribute  the  sum  of  seven  thousand  live  hundred  dollars 
(87,500)  for  the  office  expenses  of  said  James  I'arie,  jr.,  in  Savannah, 
Georgia. 

5.  It  is  understood  and  agreed  that  said  Patterr-on,  Shotter,  Anon- 
yme,  and  Xickolls,  in  conducting  their  several  businesses  as  the 
agents  and  for  account  of  Globe  as  aforesaid,  shall  conlnie  their 
operations  to  regular  business  transactions,  so  as  to  assure  as  far  as 
possible  reasonable  ami  legitimate  profits,  it  being  expressly  under- 
stood that  neither  of  said  parlies  shall  be  at  liljerty  to  do  a  specu- 
lative business  without  the  consent  of  Globe. 

0.  It  is  understood  and  agreed  that  neither  Patterson,  Shotter, 
Anonym.e,  or  Xickolls  shall  hold  any  interest  or  directly  or  indirectly 
deal  in  .\merican  tur]KT,l!ne,  except  as  the  agents  and  for  account 
and  benefit  of  Globe,  it  being  understood  that  by  American  turpen- 
tine is  meant  the  spirits  of  turpentine  and  wood  turpentine  which 
is  concentrated  at  all  and  e\ery  of  the  .\tlantic  seaj)orts  of  the 
United  States  of  America,  and  which  either  of  said  first  four  par- 
ties may  handle  and  sell  as  being  from  said  Atlantic  seaports. 

7.  It  is  understood  and  agreed  that  this  agreement  comprehends 
anil  includes  as  part  of  the  turjientine  business  herein  purchased 
the  sale  of  French  and  Spanish  turpentine  exi)orted  from  Prance 
and  Spain,  but  it  does  not  include  any  French  turjientine  handled 
or  sold  in  France  itself. 

8.  It  is  understood  and  agreed  that  this  contract  does  not  cover 
any  tuqunline  business  Vihich  Patterson  and  Shotter  may  control 
in  the  Gulf  ports  of  the  I'nited  States,  it  being  exjiected  that  the 
domestic  consum[)tion  will  absorb  all  the  receipts  cond'ig  to  said 
Gulf  j)orts.  In  the  event,  however,  the  domestic  consum[)tion  does 
not  absorb  all  of  such  Gull  port  receii)ts.  then  Patterson  and  Shot- 
ter, resix"ctively.  agree  to  turn  over  to  Globe  the  surplus  receipts, 
provided,  however,  that  th.e  (|Uant>y  of  uch  surpilus  must  be 
.specified  and  declared  on  the  fifteenth  i  •  5th)  and  last  days  of  each 
month  and  must  be  charged  to  said  Globe  at  the  a\  erage  Savannah 


exriU 


^3-' 


Indusiri.m.  Combinations  and  T'm-sts 


quotation-^  of  the  previous  fifteen  days,  with  the  exception,  however, 
of  a  surplus  at  New  Orle.ms,  not  exceeding  twenty  tliousand 
(2c,oco)  barrels  jht  annum,  for  which  Globe  herel)y  agrees  to  pay 
one  and  a  hall  ( i-j  o)  cents  per  gallon  abo\  e  the  average  quotations. 
Should  the  Savannah  quotations  during  the  periods  aiTected  be 
nclilious,  the  average  price  to  be  paid  must  be  on  the  same  basis 
that  has  been  applied  to  the  receipts  at  the  Atlantic  closed  ports. 
Patterson  and  Shotter  severally  agree  that  they  will  make  no  charge 
for  interest,  storage,  and  fire  insurance  on  such  surplus  receipts  of 
the  Gulf  ports  up  to  the  day  on  which  they  declare  the  same.  After 
said  dale  the  charges  will  l)e  a>-umed  and  borne  by  said  Globe, 
pnnidevl  that  the  same  shall  not  exceed  the  charges  now  in  force  in 
Savannah,  Georgia. 

0.  It  i.>  under>lood  and  agreed  that  Patterson  and  Shotter  and 
Xickollsf  the  latter  operating  through  James  I'arie.  jr.,  at  S.ivannali, 
Georgia)  shall  continue  to  conduct  their  re:^pective  business  »  in 
tuqientine  as  hereinln'fore  defined,  but  for  the  account  and  benet'it 
ui  Globe.  .\s  comjjensation  for  their  services  in  the  premises  said 
Patterson  and  Shotter  shall  be  allowed  a  commission  of  one  per 
cent  d'",)  on  all  sales  made  by  them.  re~jiectively,  provided, 
luiwevtr.  tliat  said  Patterson  and  Shotter  shall  only  receive  one- 
half  (}  2>  i>i  ^"■"-"  P'-T  L-ent  d'  '()  on  .sales  made  to  the  Pratt  works  in 
New  \'ork.  Prince  in  Boston,  and  on  all  sales  t(>  Philadelphia.  It 
is  furtlier  understood  that  on  sales,  transfers,  and  divisions  of  re- 
ceii)ts  to  and  with  the  Standard  Oil  ComiKiny  no  commission  will 
be  charged  except  upon  such  fiuantities  as  will  reduce  the  commit- 
ments of  Patterson  and  Shotter  under  their  contracts  with  the 
Standard  Oil  Company  in  the  Gulf  Slates,  upon  which  quantities 
they  will  be  al!  >wed  a  commission  of  one  per  cent  (i'  ,'). 

I'o.  It  is  understood  that  Xickolls  shall  not  sell  more  than  fif- 
teen thousand  (15,000)  barrels  per  ar.inim. 

11.  It  is  understood  and  agreed  that  .\nonyme  will  conduct  for 
the  company  and  for  its  benefit  any  business  otTered  for  export  in 
Spanish  and  r'reiKh  turpen'.ine,  and  th.at  said  .\nonyme  shall  be 
allowed  a  commission  of  one  per  cent  (i'"()  on  all  Spanish  turpen- 
tine, and  a  commissi;)!!  of  onedialf  (j  2)  *>'"  <>"''  P^'''  ^'t^""*  (1%)/^^ 
maximum  fifteen  thousand  (15,000)  barrel-  of   Ireiich  turpentine. 

12.  It  is  understood  and  agreed  that  the  iiinrations  of  Patterson. 
Shotter.  .\nonvme,  and  Xickolls  for  account  of  Globe  shall  be 
conducted  and  entered  under  a  turpentine  .cccount,  and  shall  in- 

'  riiUb  in  ori;;iiuil.  —  I'.d. 


Pools  and  Associatkxvs 


233 


elude  all  transaction^,  whether  actual  deiivcries  or  contracts,  where 
settlement  is  made  in  lieu  of  actual  delivery.  It  is  understood 
that  Patterson,  Shotter,  .\nonyme,  and  \ickolls,  respectively, 
shall  each  operate  in  their  own  names,  and  with  their  own  organiza- 
tions, the  said  Globe  hein^  responsil)le  for  any  losses  that  may  be 
sustained  through  the  nonfulfillment  of  contracts  or  V)ad  debts. 

The  turpentine  account  shall  be  charged  at  cost  with  all  of  the 
tuqu'ntine  bought  for  account  of  Gk)l)e,  and  such  account  shall  be 
credited  with  the  result  of  all  ^aIes  made  for  Globe.  The  said 
account  shall  not  be  charged  with  any  of  the  tirdinary  expenses  of 
maintenance  of  tlv  respective  business  '  of  said  Patterson,  Shotter, 
.\nonyme,  and  .\icknlls,  but  only  with  the  actual  e.\j)enses  of 
storage,  handling,  niarir.e  and  fire  insurance,  cabHiig  and  tck-grajih- 
ing,  legitimate  cornmi>sions  to  agents  and  brokers  for  elTixting 
.-ales,  and  interest  on  advances;  or,  in  other  words,  only  actual  out- 
lays of  money  other  than  office  e.xpenses  shall  be  charged  to  turpcn- 
tine  account. 

It  is  understood  that  the  first  four  [)arties,  respectively,  sl;.>ll 
insure  and  keep  insured  against  tire  and  marine  risk  all  turi)entine 
purchased  and  held  by  them,  respectively,  for  account  of  Globe, 
and  in  the  event  of  any  loss  being  incurred  by  reason  of  either  of 
said  first  four  parties  failing  to  insure  and  keep  insured  any  turpen- 
tmc  so  purchased  or  held  for  account  of  Globe,  such  lo>s  shall  be 
borne  by  the  party  so  in  default:  providefl,  ho\\e\er,  tliat  said  first 
four  parties  shall  not  be  held  res|)onsible  for  the  solvency  of  the 
rompany  in  which  the  insurance  may  be  effected,  and  it  is  further 
understood  and  agreed  that  inasmuch  as  saitl  Patterson  and  Shot- 
ter own  and  to  a  more  or  less  extent  operate  in  the  name  of  the 
Standard  Xaval  Stores  Company  as  [)urchasing  and  ft)rwarding 
a;:ent  of  tur])entine  purchased  ft^r  account  of  G'oliC,  the  terms  ancl 
provisions  of  this  agreement  as  to  iu'^urance  shall  be  applicable  to 
■-lid  Standard  Xav.d  Stores  Conijiany.  .md  the  said  Patterson  and 
Shotter  hereby  ma'  e  themselves  rojionsilfle  to  Globe  for  any  loss 
which  it  may  sustain  l)y  the  failure  of  the  said  Standard  Xaval 
Stores  Company  to  insure  and  keep  insured  all  turpentine  held  by 
it,  either  directly  or  indirectly,  for  account  of  .said  Globe.  It  i-^ 
understood  that  intere^^t  on  moneys  which  may  be  advanced  b\ 
either  of  the  first  four  parties  is  to  be  charged  at  the  rate  of  six  per 
cent  (()'  f)  [ler  annum,  end  in  the  event  ilifference.  occur  in  regard 
to  interest  by  re.i^on  of  the  dilTerent  mmle^  of  bookkeeping  of  the 
'  riiu.s  in  ori^rin.il.  —  VA. 


234 


iNDUsiia.vi.  ('u.\ii;iNAii(x\s  AM)  Trusts 


saiil  first  four  parlies,  il  is  understood  that  llic  same  shall  be  ad- 
ju>ted  l)y  the  auditor  of  Globe  at  the  half-yearly  settlement. 

It  is  understood  that  Patlerson,  Shotter,  Aiionyme,  and  Xickolls, 
re-[)ecti\'i'ly,  >hall  ket'p  special  books  for  turi)entine,  wliieh  books 
shall  at  all  times  be  open  to  in>peeliun  of  the  auditor  of 
Globe. 

It  i-  underi^tood  that  all  transactions  made  l)y  either  the  said 
Patterson,  Shotter,  .\nonyme,  or  Xickolls  for  account  of  the  com- 
pany shall  be  reported  daily  to  the  ])rincipal  office  of  the  com- 
pany. 

It  is  further  understood  and  a,c;reed  that  settlements  of  profit 
and  loss  account  between  Globe  and  each  of  said  fir>t  four  parties 
shall  take  place  every  six  months,  in  January  and  July,  in  each 
year,  as  soon  as  the  accounts  for  the  precediii'j;  -ix  months  can  be 
audited. 

13.  As  part  of  the  consideration  of  this  contract  Anonyme  hereby 
agrees  that  it  will  transjoort  by  its  steamers  Iris  and  Clematis  for 
account  of  Glo'.^c  a  mii.imum  of  one  hundred  thousand  (100,000) 
barrels  of  turpentine  and  a  maximum  of  one  hundred  and  fifty  thou- 
sand (150,000)  barrels  of  turpentine  jx-r  annum  i'|uantity  within 
said  limits  to  '>e  at  tht  option  of  Globe)  to  Antwerp,  Rotterdam, 
London,  Liverpool,  Mull,  Av(>nmouth,  and  Ilamburi^.  The  steam- 
ers are  to  be  loaded  at  the  discretion  of  Globe  either  at  Savannah, 
Brunswick,  Femandina,  or  Jacksonville  (always  i)ro\'idinj^  there 
is  sufficient  water  at  these  ports),  but  are  to  load  at  one  port  only. 
It  is  agreed  that  the  rate  of  frei.tjht  shall  be  three  >hillin,<i;s  nine 
pence  (^/g)  direct  for  forty  (40)  gallons  gross  gauge  in  barrels,  and 
if  shipped  in  bulk  the  rate  shall  be  the  same,  but  forty  (40)  gallons 
net.  'i'his  rate  is  without  primage.  If  said  steamer>  shall  be  called 
upon  to  load  or  discharge  in  any  two  of  the  above  named  ports, 
Globe  agrees  to  pa^  .Vv  hundred  dollars  (Sdoo)  additional  for  such 
loading,  and  -ix  hundred  dollars  (vS6oo)  additional  for  such  dis- 
charging. It  is  understood  that  Anonyme  will  complete  the  car- 
goes of  said  steamers  with  rosin  or  other  goods  at  their  convenience 
and  for  their  own  account  and  at  their  ri>k. 

It  is  understood  that  Anonyme  shall  not  transport  to  Europe 
more  than  one  hundred  thousand  (100,000)  barrel,  of  rosin  per 
annum  on  the  Iris  or  drmatis.  In  the  event  the  said  Iris  or  the 
said  Clcmalis  do  not  carry  this  stipulated  amount  it  i-  understood 
that  the  said  Anonyme  may  use  outside  steamers  or  -ailing  vessels, 
but  it  is  distinctlv  understood  that  in  such  e\eiit  the  ([uaiuity  of 


11: 


Pdois  AM)  Association's 


.■).i 


rosin  to  b?  shi])[)i'(i  for  account  of  :-ai(i  Anmiynie  ^hall  not  cxccrd 


seventy   thousand    (70,000)    tjarnl 
roMn  sliippcd  by  tlu-: 


and 


'fees  that 


tlu 


Anonymc    furthc: 
)unt  shall  h 


\vn  accoi 
lor  llif  port  ot  .\nt\v;r[)  cxclusivily. 

It  i>  further  understood  and  a.^^'ned  that  all  rosin  which  Anonynie 
may  sell  in  London  or  Hamburi^  shall  be  lor  the  joint  account  of 
Patterson  and  Shotter,  and  in  consideration  thereof  said  Patterson 
and  Shotter  hereby  a^ree  to  pay  said  Anon\nie  a  net  commi>sion 
of  fix-e  cents  (5c.)  per  barrel  of  two  hundri'd  and  lij^dity  (  jSo)  pounds 
and  freight  at  the  rate  of  two  shillings  and  thrive  pence  1^/3)  for 
three  hundred  and  ten  (no)  pounds  direct  Ilaniburp  or  London 
with  no  primage.  It  is  understooil  that  the  quantity  which  may  be 
^nld  by  said  Anonyme  in  London  and  Ifamburj^  for  account  of  said 
I'atterson  and  Shotter  shall  not  be  less  than  tifteen  thousand 
(15,000)  nor  more  than  twenty  thousand  (20,000)  '  ^rrels,  theciuan- 
tity  within  said  limits  to  Ijc  at  the  option  of  said  Patterson  and 
Shotter;  and  the  said  Patterson  and  Sliottir  reserve  the  ri;,'ht  to 
desif:;nate  cither  Ilamburji  or  London.  And  it  is  furtlur  under- 
stood that  said  Anonyme  shall  not  be  entitled  to  any  commission  on 
any  rosin  which  has  been  furnished  by  said  Patterson  and  Shotter 
to  complete  cargoes  for  London,  Hamburg,  or  any  other  port 
which  may  be  agreed  upon. 

S.uil  Patterson  and  Sliotter  hereby  several!^-  agree  that  they  will 
not  sell  any  rosin  for  shipment  to  a  Belgian  port,  and  tiiey  further 
agree  that  at  the  re(|uest  of  said  Anonymv',  and  as  ;e(iuired  by  them, 
they  will  furni-h  and  |)rovide  rosin  for  the  purposes  and  within  the 
limitations  therein  specilied  in  fair  i)roportions  from  B  to  K,  inclu- 
sive, free  of  charge  for  storage  and  hre  insurance,  and  as  compensa- 
tion to  the  said  Patterson  and  Shotter  for  ])roviding  such  rosin 
said  Anonyme  agrees  to  pay  said  Patterson  and  Shotter  a  commis- 
sion of  seven  and  one  half  (7-'  2)  cents  for  every  barrel  of  two  hun- 
dred and  eighty  (280)  pounds  so  provitled  by  them. 

.Vnd  said  Anonyme  further  agrees  to  give  to  said  Patters(Mi  and 
Shotter  thirty  (30)  days'  notice  in  writing  (notice  to  either  being 
considered  as  notice  to  both)  of  their  rt'fjuirements  of  rosin  under 
the  provisions  hereinbefore  set  forth,  and  it  is  further  understood 
and  agreed  that  the  jirice  of  rosin  so  to  be  ordered  and  furnished 
shall  be  leased  upon  the  average  price  of  the  res[)ective  grades  dur- 
ing th-  thirty  (30)  days  after  the  orders  for  the  same  have  been 
received;  provided,  hinvever,  that  if  circumstances  arise  of  such 
ch;*racter  which  will  prevent  saitl  .\nonyme  (acting  with  reasona- 


M\ 


ui 


236 


IXDUSTRIAl.    ("OMBINATIONS    AND    TuUSTS 


t)le  discretion)  from  Kivin-  the  notice  hereinbefore  mentioned, 
then,  and  in  such  lasr.  tlie  price  of  the  rosin  so  ordered,  and 
furnished  ^h.ill  lie  ba-ed  Ui)on  the  average  price  of  the  respective 
grade  '  ai  Savannah  .iuring  the  chirty  (30)  days  immediately  loUow- 
ing  the  date  of  the  reciii)t  of  the  notice. 

It  is  further  under,  tood  and  agreed  that  for  the  purpose  of  com- 
pleting the  cargvtes  of  vessel-  carrving  turpentin.  in  the  manner 
hereinheiore  referred  to,  said  ratler-un  and  ^hotter  shall,  when 
and  a.^  reciuired  hv  <aid  Anonyme  and  Xickolls,  respectively,  fur- 
ni-;h  for  siid  ves-el-  i>art  cargoes  of  rosin  for  their  own  account  it 
current  market  frei-'nt  rates,  provided  that  said  Patterson  and 
Shotter  shall  m  no  ( a-e  he  required  to  furnish  more  than  thirt\  per 
cent  { ^,0']})  of  the  carrving  capacitv  of  said  vessels.  As  the  princi- 
pal consideration  iiKAing  saici  ratter>on  and  Shotter  for  making 
the  freight  arrangements  herein  s"'t  forth,  said  Anonyme  and  Nick- 
.,!U  hereby  severally  aiiree  that  th-A  •.vill  not  buy  "r  sell,  either 
directly  or  indirectly.  American  rosin,  except  in  the  manner  and 
under 'the  limitation-  in  this  agreement  set  forth. 

14.  It  is  further  uialer-tood  and  a:::red  that  if  for  any  cause  anv 
,.r  all  of  the  first  four  parti-s  -hall  di>coi,ti;iue  business  during 
term  of  this  agrtenien*    thin  and  in  -uchcNen*  (llobe  shall  have  t, a- 
right  to  purchase  the  -hare-  of  stoA  of  the  party  or  parties  -o  di^- 
cmtinuing  busine-s  at  par.  ,    ,,  , 

I  V  It  is  understood  and  ;;gri<d  tliat  this  agreement  shall  begin 
on  the  hrst  (hiy  of  Ap.ril.  1005.  and  -hall  continue  for  the  full  term 
<if  live  (";)  vears.  ,   . 

10.  It  i  further  agreed  tl.at  in  the  event  any  diflerence  of  opinion 
-hall  arise  between  two  or  more  of  siid  parties  as  regard-  the  mean- 
ing of  any  txirt  of  this  a  reenKnl.  all  -'u  h  differences  shall  be 
settled  by'ar'bitritinn  in  N.  .v  York,  e.ii  h  -ide  selecting  an  arbitra- 
tor, and  the  arbitr.itor-  -o  -elected,  before  taking  knov.'edge  ot  the 
(h-put'-.  shall  select  .m  umpire,  and  the  ,i\sard  of  the  arbitr.itur- 

shall  be'  tinal.  . 

In  witne-s  whereof  tlie  corjiorat'on-  above  n.imeil  by  t.air  proj.er 
oflicers.and  thes.iid  Nickoll  \-  Knight  in  piopt  r  jx tmiu.  li,i\e  here 
unto  -et  their  hand-  a.nd  alhved  their  -eal-.  the  -eal-  ot  -.ud  cor- 
porations being  diilv  alte-t(d  by  their  respective  secretaries,  the 
day  and  \ear  lir>L  abovi'  written. 

(Signatures) 
'  Thus  in  uriL'inal   -Kd. 


Pools  and  Associations 


237 


Exhibit  io 

BATH   TIB   (  O.MniNATION' 
MEMORANDrM    OF    AoRKEUENT 


t.DWTN  L.  WAV  MAX 

i50<;  Arrcjtt  Bldj^. 
Pittsburgh 

Wo  hereby  agree  to  execute  with  K.  L.  Wayman  of  the  City  of 
I'itt^burg,  as  Licensor,  <m  or  before  April  if^th,  igio,  a  License 
Agreement  for  the  Manufacture  of  Sanitary  Lnanieled  Ware  under 
the  following  United  States  Letters  Patent. 

"Various  Patents  covering  Pneumatic  Dredgers." 
(t'l  be  enumerated   in   detail). 

and  >uch  additional  Patents  as  may  come  into  liis  possession,  upon 
the  Terms,  Conditions,  <.{(.     ,i>  licreiiMftiT  staltd  nr  provided  for: — 

1.      The  Licin:-e  ..^reement  to  cover  the  following 
ScluduK's  of  Mn;imel('d  Ware 
Schrdule  I.     5  yiar  Ciuaraiiteed  Haths. 

All  .,;her  Grades  of  Paths. 

Siiiall   Ware,  Lavatories,  etc.   and 

R.  R.  sinks. 
Flat  Rim  Sinks 
Comj)etitive  La\atories  552  to  5A2 

Luiusive  5()^  and  5  Vv 


,^ 


'  I'tntni  Sl'ilr^  of  Amitira  v.  Tli'  SlaitJ^ird  S,:i::h}rv  Maniifaituriiif,  Com- 
p.uiw  iiiid  ntlirr-:.  In  llic  ("inuil  Cmirl  ul  llic  Unitid  SlaU's  fur  lac  Dislritt  uf 
M,!r\lan(l,  (lov't  lAhiliit  No.  ,?.  kicoril.  \iil.  II,  [ip.  4-^).    It  is  lU'icssary  that 

iiir  r\|>lan.ilion  sIuhiM  l>e  ^•ivt.■n  in  regard  ti>  the  bath  tub  >  omijination.  Both 
■  the  ixhibils  should  lir-t  l>i'  riad  to  make  the  situation  dear  as  ;'!>()  the  cx- 

r|ils  from  the  opinion  of  Ju(ii;e  Rose  against  the  eonibination  (<  f.  i'liap.  XIII). 
'  I  1  the  face  of  the  matt(  r  the  •  •■  liination  apjH'ars  to  be  a  patent  mono|Hil\ . 
riie  (ontcntion  of  the  (io\ernr  it  iiovve\er  was  that  the  iitcns.in>;  si  heme  was 
P'Tily  ,1  se.ljterfuRc,  n  devi(  ,■  •  '  for  the  pur|H)se  of  c  realinR  the  combination. 
!  -  iew  is  of  < ourso  sup|xirti  1  by  the  fai  t  that  none  of  the  patents  whii  h  were 
rd  to  Wayman  by  three  niemlnrs  of  the  suliseriuent  eonibiiiatiou  were  or 
ari'  absolutely  necessary  in  the  manufacture  of  .siinitary  enanuled  inin  ware. 
I'or  this  reason  the  combination  h.is  l)een  assigned  a,  place  among  the  (kkjIs 
r.ither  than  among  the  fwlenl  mono|)<)lics. — lid. 


5^ 


-'3^ 


Industrial  CoMnixATinxs  and  Trusts 

2.  The  amount  of  1^    yalty  to  he  as  follow-: 

S5.00  prr  (lay  per  lurnate  in  operation  with  a  rohate 
of  90  per  cent,  hefiinninL;  with  the  i>t  month  0I 
the  :nd  Period  and  monthly  thereafter,  if  the 
terms  of  the  Lircn-c  ha\a-  l>een  eomplied  with 

3.  For  eaen  violation  of  the   Price   Re^'ulatioiis  of  the 

License  Agreement  we  a,<,'ree  to  forfeit  a  sum 
equal  to  the  amount  of  the  shipment  in  ciuestion, 
and  ruch  otlur  penalties  as  may  be  a^reeil 
on. 

4.  Th"  Sellini:  I'rices  to  tlie  Jobbers  to  be  e>tabhshed 

throuLTh  till'  Licensor  by  a  Price  Committee  ap- 
pointrd  bv  the  various  manufacturers. 

5.  The   Re^-ale   I"rice>  to  the  Jobber,  taking;  into  con- 

sideration the  rebate  for  ob-ervanee  <.f  HuyinL' 
and  Sellin,!,'  Regulations  --Ik'H  be  ir.'und  a-  fol- 
lows: 

Ili.u'h  Grade  C'.oods       :;'",'  above  Jobbers  co-t. 
Conii)etition  (iootls  lOj'i'  ('  above  Jobbers  co.st. 

6.  The  Rebates  to  jobbers  shall  Ik;  as  follows: 

loTf.  payalile  ai  end  of  Period  for  strict  observance 
of  agreements,  the  details  of  the  manner  in  whirli 
the  n  bate  slull  be  made,  to  be  determined. 

7.  The  Unu'ih  of  the  Reb.iie  P.-riods  sbaM  be  3  months 

he<:innin;,'  Aiiril  islh,  ii)io,  with  the  exeeption 
of  the  hr.--t  period,  which  sliall  end  July   r-t. 

8.  The  License  .X^reement  and  Resde  Prices  >hall  be- 

come clTective  .Vpril  lOi,'  and  tlie  ajireeinent  to 
be  executed  between  the  M.mul.icturers  and 
Jobbers  >h;dl  contain  a  chiu>e  to  the  etTect  that 
all  material  purchased  or  on  hand  previous  to  the 
alK)VC  date  shall  be  >old  ai  the  Re-~.de  Prii  i  >  that 
m.iy  1)0  establisheil. 

9.  The  details  t)f  Contract  porms  between  the   M.iiiu 

facturcrs  and  the  Licen-or  shall  be  drawn  up  by 
the  Licensor  and  submitted  I'or  ai)proval  at  the 
next  Special  Meeting  to  be  h.  Id  in  New  York 
Cilv. 
The  LireiiMir  will  al.so  su!)mi!  the  ^ame  covering 
Agreenuiit  between  .Manul.nturers  and  Jobbers. 

'  Thus  in  original. — K»l. 


10. 


■I: 


Pools  and  .\ss(Xiation"s 


'39 


II. 


The 


fnllowin;:;    ■' PrcUTriilial    Di-counls"    from    the 
scUinjT;  Prices  established  by  the  licensor  will  be 


ill( 


the 


M 


anuiacturers  on  Sales  to 


Baths 


lowed  tne  vanoi!- 
Johbcrs  o)il\-. 

Schedule  i — 5  year  (iuaraiUee( 
2—:! 

3— All  ..auT  (irades  of  P.aths 
"         4 — Small     Ware — Lavatories,     etc.    & 

R.  R.  Sinks. 
'■         5 — Sink>,  llat  rim. 

"         6 — Competitive  lavatories  552-562  In- 
clusive 505  and  535 

SCHEDULES. 


Manufacturers           i 

T 

,^ 

4 

.? 

6 

-^t.indard                 None 
WoIiT 

r.  s.                   " 

None 

None 

None       \( 

ini 

None 

i( 

<i 

II 

1 

<i 

Kohler                       " 

(( 

II 

II 

I 

(( 

liarnes                          " 

II 

II 

II 

1 

(< 

Ciluii                            " 

<i 

II 

II 

( 

II 

-[■.;i                         " 

i< 

II 

II 

1 

II 

liiion                       5% 

2f% 
2% 

ii 

2h% 

1 

It 

Cnlwell                       5% 

(1 

2\% 

1 

11 

f'lvmer                      5% 

22% 

<( 

2i% 

( 

II 

iUairsvilh'                 5% 

2^% 

i( 

22% 

i 

It 

McVav  \-  Walker     5% 

2.% 

<< 

22% 

i 

II 

Wei.killel                   5% 

2^% 

<< 

22% 

< 

II 

National                     5^^ 

2|% 

2% 

<{ 

2% 

( 

It 

Iron  City                   5% 

u 

22% 

< 

It 

Hiiniphrvcs               5% 

2/;; 

22% 

( 

" 

h.!y-Ward                 2},% 

2i% 

(4 

25% 

1 

It 

Ml  ("rum-How  rll      5'"^ 

2Yyr 

(1 

2i% 

i 

II 

Wheeling                  5% 

2I'; 

** 

25% 

i 

** 

12.     The  len^jth  of  time  for  whicli  t 

u    License 

\P 

eement 

will   lu- 

entered  into  and 

>u<  h  other 

<•> 

tails  as 

may  bo 

necessary 

•  for  the 

perfection 

ul 

the  ar- 

ranj^enit 

"nt  to  \)v  ( 

Ii'f<'rniine(l  at  tin   iie 

\t 

luiting 

of  the  \ 

ariuus  M. 

uiufatturers. 

11'  re  follow  eleven  signatures.) 


Signed 


I 


-  ■  !^f.'  a-ii-  ■ 


240 


Indlstkial  Combinations  anu  Trusts 


ElIXIBIT    II 


UATII    TUB   COMBINATION 

Li(  i;nsi,  acrkf.mlnt  ' 

This  Agreement,  Made  in  duplicate  this day  of 

igi .  •  .  between  Kdwin  L.  Wayman,  a  resident  of  the  City  of  Pitt>- 
l)urj,'h,  State  of  Pennsylvania  (hereinafter  called  the  "Licensor"), 
l)arly  of  the  first  part,  and 

a  corporation  duly  orj^anized  and  existing  under  and  l)y  virtue  ol 

the  laws  of  the  State  of (hereinafter  called 

the  "Licensee"),  party  of  the  second  part. 
W'l !  XKSsi.ru: 

That  Wiu.km as,  the  >aid  Wayman  owns  or  controls  or  has  the 
ri^ht  to  ^rant  !icen>es  under  certain  LeltiTs  Patent  pertaining;  to 
th<'  manufacture  of  Sanil.iry  Knanielcd  Iron  W're.  enumerated 
in  "Schedule  of  Patents,"  lunto  annexed,  and 

Whereas,  The  Licen>ee  i>  de-irou>  of  aciiuirins^  a  License  under 
said  Letters  Patent  of  the  character  and  upon  the  terms  and  condi- 
tions herein  set  forth; 

Now,  TiiEREKOKr,  for  and  in  consideration  of  the  covenant -- 
of  this  agreement,  the  parties  hereto  a^ree  as  follows: — 

I.  The  Lici'nM>r  herelty  f,'rant>  to  the  Licensee,  subject  to  the  jjro- 
visi(Mis  h.ereinafter  tontained,  a  non-e\clu'~ive  License  to  practice 
in  tlie  manufacture  of  Sanitary  I'.nameied  Iron  Ware,  the  processes 
patented  in  -aid  several  Patents,  to  make  and  u>e  in  such  manufac- 
ture the  machine-,  and  .".'vices  patented  in  said  Patents  and  to  use 
and  srll  goods  mi  made:  the  said  Licence  hring  non-a>signal)le  and 
:ion-transferahle  except  lo  successors  to  suh-tantially  the  entire 
f^ood-will  and  business  of  the  Licensee,  and  this  License  shall  be 
available  for  the  Licensee  and  its  succes>ors  only  so  long  as  it  or 
the,  have  not.  prior  to  the  date  hereof,  been  en;:if;ed  in  the  manu- 
facture of  Sanitary    Lnameled   Iron  Ware. 

CLAIMS.  2.  The   Licen^ir    hereby   aRfr-cs   to  suspend 

his  claims  agaiiisl  the  Licensee  and  its  cus- 
tomers or  patrons  for  damages  or  profits  which 
he  may  be  entitled  to  receive  for  any  claims 
for  any  past  infrintjenunt  of  said  Letters  Pit- 
« Op.  cit.  U.  S.  V.  a.  S.  \f'f'i  C>.    Rco.ril.  V..I.  II,  pp.  20-26. 


PtJOLS    AND    ASS()(I\1;<)\S 


241 


ent  by  said  Licensee,  as  lon<^  as  said  Licensee 
continues  to  perform  all  oi  its  obligations  under 
this  contract. 

3.  So  long  as  the  Licensee  operates  under 
this  License  or  any  renewal  thereof  and  keeps 
and  performs  all  of  the  obligations  of  said  Li- 
cense herein  contained,  the  Licensor  agree-  not 
to  bring  action  against  said  Licensee  because  of 
its  use  of  any  machine^,  method  or  processes 
now  or  heretofore  used  by  said  Licensee  in  the 
manufacture  of  enameled  ware,  and  to  waive 
any  and  all  claims  under  any  letters  patent  on 
any  machines,  devices,  or  jirocesses  now  in  u>e 
by  said  Licensee,  and  to  grant  to  said  Licensee 
fi.il  use  and  enjoyment  th.erecM". 
KO\  ALTILS.  4.  For  the  use  of  the  \arious  jjatents  enumer- 
ated ia  ''Schedule  of  Patents,"  hereto  annexed, 
the  Licensee  shall  pay  on  the  fifth  day  of  each 
month  a  royalty  amounting  to  Five  (S5.00) 
Dollar-  j)er  day  for  each  furnace  in  operation 
during  the  preceding  month. 

This  payment  shall  be  made  to  the  Licensor 
at  his  pl.ice  of  l)usiness  in  Pittsburgh,  Pa.,  by 
cash  or  other  acceptable  remiitance,  and  in 
determining  the  amount  of  this  royalty  each 
and  every  one  of  the  furnaces  owned  by  the  Li- 
censee shall  be  considered  as  in  operation  each 
day,  unless  the  -aid  furnace  or  furnaces  shall  be 
shut  down  for  more  than  a  perie'd  of  si.\  (d)  eon- 
secuti\e  working  days.  In  case  any  of  tin  fur- 
naces are  thus  shut  down  for  more  tiian  si.\  (0) 
consecutive  working  days,  the  Licenr^ee  sh.ill  lie 
enlitled  to  a  diminution  of  his  License  payment 
at  the  rate  ol  Five  (S^.oo)  Dollars  per  working 
day  for  the  number  of  days  shut  down. 

In  order  to  determine  th<'  amount  of  actual 
license  p.iyment,  together  with  the  remittance 
hereinbefore  providul  for  p.iyment  of  royalty, 
the  IJiensee  shall  send  lo  the  Licensor  a  sworn 
statement,  which  will  be  duly  vcrit'ied  under 
oath  by  some  rcprtscntative  of  the  Licensee, 


lU 


-  t,ta»ti 


I 


24^ 


IXUUSTRIAL   COMHINATIOXS   AND   TRUSTS 


ck-iunatcd  liy  the  Licensor  showing  the  number 
ot  furnaces  owned  by  the  Licensee  at  the  begin- 
ning of  the  month  w  hich  the  report  is  intended 
to  cover  and  the  number  of  ilays  which  such 
furnaces  have  been  o[)erating  consistent  with 
the  provisions  of  the  foregoing  Section  of  this 
License. 
PREFERF.XTL\L  5.  This  agreement  is  entered  into  with  the 
DISCOUNTS.  under>tan(Hng  that  the  Licensee  ha;  the  priv- 
ilege of  c(uoting  to  jobbers  only  the  following 
additional  discounts  from  the  regular  selling 
prices  to  the  Jo'obcrs  as  established  by  the  Li- 
censor. These  additional  discounts  when  given 
.-.hall  appear  on  the  invoices  rendered  to  the 
lobber. 


PRICES.  6.  The  Licensor  agrees  that  he  will  employ  a 

^ommi^^ion  of  six  (0)  persons,  of  which  he  is  to 
be  one  and  to  act  as  Chairman  thereof,  five  of 
whom  -.-hall  be  designated  by  a  majority  of  the 
partie>  holding  Licenses  >imilar  to  this  Licence, 
which  Commission  shall  ha\e  supervi-it>n  of  all 
the  relations  and  transactions  between  the  par- 
ties hereto  under  this  agreement,  but  it  is  under- 
stood that  where  a  member  of  said  Commission, 
or  his  Company,  shall  be  directly  interested  in 
any  (|uestion  of  a  violation  of  the  License  to  be 
decided  \i\  the  said  Commission.  s;:id  member 
shall  be  (lis(|ualilied  and  a  temporary  member 
shall  be  appointed  in  hi-  place  by  the  remaining 
numbers  of  the  CtMiuiii-.-ion. 

All  terms  and  conditions  relative  to  prices 
and  di>coiuUs  now  established  by  the  Licensor 
and  >et  forth  in  the  annexed  schedules  and 
made  a  part  hereof,  shall  remain  in  forci'  and 
etTect  until  other  trrni>,  ronditiDns  and  pref- 
erential discounts  are  sui)stiiute(l  therefor  by 
the  Licensor,  which  substitution  can  only  he 
m.idc  bv  him  with  the  .ijiproval  of  a  majority  of 


Pools  and  Association's 


»4S 


I 


the  members  of  the  Commission,  hereinbefore 
prtscrilK'd.  Notice  of  Mjch  changes  and  substi- 
tutions shall  be  given  from  time  to  time  in 
writing  by  the  Licensor  to  the  Licensee.-..  The 
Licensee  covenants  to  adhere  to  anrl  maintain 
such  tiTms,  conditions,  regulation-  and  pref- 
erential discounts  as  may  be  establi-hed  l)y  tb.e 
Licensor  from  time  to  time,  and  the  Licensee 
further  agrees  to  -.(II  no  "Seconds"  or  "Bs"' 
coviTid  liy  Scheduli  4,  4  ,'-{>.  5  and  6. 
ROYALT^'  7.   If  at  the  end  oi  the  fourth  month  of  the 

REBATKS.  first  year  (.-aid  year  liegiiming  June  ist,  1910) 
it  .--hall  appear  tliat  the  Licensee  has  during  the 
fir-^t  month  complied  with  all  the  terms  of  this 
agreement,  the  Licensor  shall  return  the  Li- 
censee the  fallowing  rebate  from  the  royalties 
paid  for  >aid  License  for  said  lir-t  month's 
royaltio,  to  wit:  iSo'^(  oi  the  amount  originally 
paid  by  the  Licensee. 

8.  .\t  the  termination  of  each  succeeding 
month  of  the  said  License  if  it  >hall  appear  that 
the  Licen  e  has  fully  comjilied  with  the  terms 
of  this  agreement  durini-  the  second  {)receding 
month,  the  Liren-nr  ~hall  make  a  similar  rebate 
in  re^jiK  t  to  the  royalties  paiil  by  the  Licensee 
during   the   setond   i)receding   month. 

g.  In  case  of  failure  on  the  jiart  <if  the  L- 
censee  to  com])ly  in  any  i).irti(  ular  with  the 
terms  of  this  agreement  during  any  nmnth,  the 
Licensor  ma_\'  withhold  any  and  all  unpaid 
rebates  and  declare  the  >anu'  forfeited  as[)enalty 
for  such  violation  and  >hall  at  ome  notily  the 
Licensee   to   that  clTect. 


Iv 


LABELS.  IV  No  g(iod<  manufactured   under  lhi>  Li- 

cence shall  be  suld  unless  they  bear  a  registered 
label  (e.\cei)t  where  otherwise  ^pecilied)  owned 
!)y  the  Licensee  and  in  addition  thereto  a  Li- 
cense tag  or  laljel  api  roved  liy   the  Liv fnsor, 


244 


Lnuustrial  Combinations  and  Trusts 


which  License  tuR  or  label  shall  be  placed  in  a 
visible  pt)silion  on  all  ^(Hjds  made  hereunder  and 
sold  by  the  Licensee. 

14.  This  agreement  is  binding  upon  the  par- 
ties hereto,  and  the  successor  and  assigns  of  each 
of  them,  and  shall  continue  in  force  for  a  period 
of  two  years  from  the  date  hereof,  unless  pre- 
viously terminated  as  herein  provided. 

15.  "This  agreement,  however,  may  be  can- 
celled by  the  Licen^<Jr  by  written  notice  upon 
repeated  breaches  l>y  the  Licensee  of  any  of  the 
covenants  herein  contained. 

In  Witm  ss  Whkrkok,  the  parties  hereto 
have  executed  these  presents  the  day  and  year 
above  written. 


SCHEDULE   OF    PATENTS. 


Pat.  No 


Q40.b25 
9,50,918 


Date 

Sept.  2b,  iSqg 


Feb. 
Nov. 


igio 
iQog 


Inventor 
James  .\rrott 

e..  Ditheridge 


Title 

Dredger  for  pul- 
verulent mate- 
rial 

Pneumatic  Sieve 


William  Lindsay    Enameling  Pow- 
der Distributor. 


Exhibit  1:2 

MEMOR-ANDUM  OF  AGREEMENT    CAM  ED  THE  EASTWARD  AGREEMENT) 

REGARDING  THE  TRADE  BETWEEN  THE    \TLANTir  PORTS  OF  THE 

U.    S.    A.    AND    EASTERN    ASIATIC    PORTS  ' 

EASTWARD   AGKEE.MENT 

I'uitcd  Stiit<<  of  America  lo  the  Straits,  Manila,  China,  and  Japan. 

Fo'-  the  better  regulation  of  the  trade  between  the  Atlantic  Ports 
of  th.  United  States  df  America  and  Eastern  Asiatic  Ports,  it  is 
hereby  agreed  as  follows: — 

I.  That  on  the  l)asis  of  forty-one  sailings  per  annum  the  total 

shall  lie  divided  a-^  follows: 

'  Vnitrd  States  of  Amrrica  v.  American- A  static  Steamship  Company.  IVti- 
tion.  III  equity  in  ttu-  I)i-iri>i  ('(v,;r'  >ii'  i!;c  Lnilcd  blatc    lor  the  Southern  Dis- 

triil  111  Nrw  S'urk,  I.xhiliil    i,  |i]).  -;'-jO- 


r 


Pools  axd  Association's 

Unitcci  States  and  China-Jai)an  Line. 12,  sailin<Ts 

Messrs.  liarber  &  Co.'s  Line. 13  sailings 

The  .American  and  Oriental  Line. 8  .sailings 

The  American-Asiatic  S.  S.  Cu. 


-45 


41 


luings. 
iilings 


Xo  other  sailings  can  be  admitted  without  the  consent  of  two- 
thirds  of  the  signatories  based  on  their  respective  numl)er  of  sailings. 

The  sailings  allotted  to  each  of  the  >ignatories  sliail  i)e  distrib- 
uted as  nearly  as  possible  at  regvilar  interval>  throughout  the  twelve 
i'.ionths,  and  the  order  of  taking  the  ijerth  <hall  be  mutually  ar- 
ranged by  the  agents  in  .Vew  ^■ork. 

2.  That  the  fundamental  condition  of  this  agreement  is  to  he 
ck)se  co-operation,  and  in  order  to  secure  this  result  the  rate^  of 
freight  from  .America  to  the  East  shall  iie  controlled  and  mutually 
determined  by  the  agents  in  Xew  York,  who  before  naming  or 
altering  a  rate  on  any  commodity  shall  first  confer  and  agrei' 
•  iiiiongst  themselves  as  to  the  rate  to  be  named  and  or  '  the  reduc- 
tion to  l)e  made. 

.Ml  engagements  shall  be  reported  to  one  another  by  the  Agents 
in  Conference  the  first  business  day  of  each  week,  and  copies  of 
freight  lists  arc  to  be  exchanged  not  less  than  three  weeks  after  the 
dt])arture  of    he  steamer. 

!,.  That  all  contracts  shall  be  taken  for  joint  account,  and  where 
such  contracts  cannot  be  divided  such  shortages  shall  be  made  good 
to  the  parties  in  arrear  out  of  the  other  contracts  previously  or  sub- 
>e(iuently  secured,  it  being  the  purpose  to  e(iuitably  divide  all  book- 
ings. Each  line  shall,  however,  be  entitletl  to  book  cargo  specifically 
for  their  next  stiamer  to  be  despatched.  i)rovided  ready  to  load 
within  ,^0  di'.ys.  Xo  line  to  book  cargo  specifically  for  a  steamer  until 
allowedtodosobyatwo-thirdsmajorityvoteof  the  Xew  York  agents, 
based  on  their  principals'  respective  number  of  allotted  sailings. 

4.  That  engagements  of  Petroleum  in  cases.  Phosphate  Rock  ami 
Coal  are  not  necessarily  joint  operations,  but  competition  for  such 
arlich's  is  to  be  axoided  and  the  closest  possible  co-operation  is  to  be 
aimed  at.  Bookings  of  Petroleum  in  cases,  Phosphate  Rock  and 
Coal  are  to  be  reported  as  soon  as  fixed. 

V  That  shipments  of  the  Quartermaster's  Deiiartment.  the  \';i\  y 
(excluding  Coal),  and  the  Insular  Department,  and  or  any  other 
Government  Department,  shall  be  taken   for  joint  account   and 

'  Tbui  in  original. — LJ. 


i 
i 
J- 

1 

i  •       -^ 

246 


LnUUSTKIAL    C(J.MliIXATI(.).\S   AND    TRUSTS 


pooled  on  a  basis  to  1)l-  a;;rct'(l  t)Lt\vccn  the  respective  Agents  ^n 
such  a  way  that  all  may  obtain  their  pro|)er  proportion  of  the  ben- 
efits arisinji;  from  such  contracts.  Shipments  of  Specie  and  Explo- 
sives -hall  bt-        .It  with  in  like  manner. 

6.  That  no  reiurn  of  any  ckscriittion  be  given  to  Shippers,  Con- 
tractors, etc.,  and  where  Freight  Brokerages  are  paid  the  amount 
shall  not  exceed  one  and  one-ciuarter  per  cent.,  unless  where  mu- 
tually agreed  I)y  all  Agents  to  the  contrary. 

7.  That  in  order  to  avoid  unnecessary  exjjense  and  possible  delay, 
the  re-pecti\'c  jxirties  shall  nominate  one  of  the  firms  of  .\gents  in 
Xew  York  to  act  for  the  time  being  as  the  mouthpiece  of  the  .\sso- 
ciated  Agents;  and  also  shall  ap[)oint  one  of  their  own  number  to 
act  in  a  similar  capacity  on  this  side.  All  cabled  encjuiries  regard- 
ing matters  of  policy,  important  contracts,  etc.,  shall  be  communi- 
cated to  the  resjiective  parties  through  this  channel,  and  their  replies 
forwarded  in  the  same  way;  but  it  is  understood  that  this  ar^-mge- 
ment  in  no  \vay  interferes  with  the  right  of  each  signatory  to  commu- 
nicate with  his  own  Agents  w  hene\er  and  Iiowcnxt  he  thinks  fit. 

S.  That  in  all  matters  of  detail  not  herein  decided  the  settlemen" 
shall  be  left  in  the  hands  of  tlu'  Agents  in  Xew  York,  who  sh.dl  as 
far  as  possible  be  gi\en  a  free  hand  in  the  conduct  of  their  business. 

g.  That  where  it  is  considered  advisable  to  book  cargo  for  ac- 
count of  the  .Associated  Lines,  which  through  lack  of  accommoda- 
tion on  the  regular  steamers  might  otherwise  fall  into  the  hands  of 
conijjetitors,  such  cargo  shall  be  taken  care  of  by  chartering  addi- 
tional tonnage,  the  result  to  be  divided  in  proper  ])ro])ortion  between 
the  various  interests,  and  the  loading  commission  credited  to  the 
A'^ents  pro  rata  to  the  share  in  the  trade  which  each  of  the  signa- 
tories hold,  based  on  their  respecti\X'  number  of  sailings. 

-Ml  ([uestions  connected  with  the  lK>okings  of  such  additional 
cargo  and  the  chartering  of  tonnage  shall  be  governed  by  a  two- 
thirds  majority  vote  of  the  Xew  York  Agents,  based  on  their  prin- 
cipals' respective  number  of  allotted  sailings.  Each  service  to 
charter  and  load  such  extra  tonnage  in  turn. 

10.  That  the  whole  purpose  of  this  .Agreement  is  an  cciuitable  and 
fair  (li\i-ion  of  the  tratTic  l)etween  the  services,  to  work  openly  and 
fairly  with  one  another,  and  to  avoid  any  and  all  stei)s  by  which 
e\-en  the  appearance  of  undvie  adxantaiie  is  gi\-en.  Should  therefore 
conditions  and  (|uestion>  arise  which  are  not  herein  pro\'ided  foi, 
the  purp.ort  and  not  the  strict  wording  of  this  Agreement  is  to  be 
considered. 


Pools  and  Associai.  lns 


^47 


11.  That  no  steamer  of  a  tjreater  carrying  capacity  than  S.ooo 
tons  all  told  is  to  be  loaded  under  this  Agreement,  except  by  the 
unanimous  consent  of  the  Agents. 

12.  That  should  any  di-putcs  arise  under  this  .Xjireement  they 
are  t'.  be  left  to  the  decision  of  the  signatories  to  this  Agreement, 
whose  voting  power  shall  be  pro  rata  to  their  >liare  in  the  busine-s. 

Should  any  deei.-ion  so  arrived  at  be  objected  to  by  any  i)arty 
or  •  trtics  hereto,  the  matter  shall  be  referred  to  the  decision  of  two 
.•\:  :rators,  who  >hali  be  t.immereicd  men  in  London,  New  York, 
or  ilong  Kong,  whiche\er  jilaee  in  the  opinion  of  the  majority  of 
tlie  signatories,  as  above,  is  Ijest  suited  for  the  j)urpo>e,  one  to  be 
appointed  by  the  parly  or  parties  claiming  or  oljjecting  as  the  case 
may  be,  and  the  other  by  the  parly  or  j)arties  against  whom  the 
claim  or  objection  is  m..de;  or  in  the  case  of  a  question  as  to  the 
WiHdity  of  a  settlement  by  those  parties  who  are  content  with  the 
M  ttlement  as  presented;  with  power  to  such  n<iminated  Arbitrators 
III  appoint  an  Umpire  who^e  decision  shall  be  I'lnal  and  conclusive 
between  all  the  parlies  to  this  Agreement,  and  \ov  the  purposes  of 
any  such  reference  this  .\greement  shall  be  deemed  to  lie  a  >ubmis- 
^ion  to  Arbitration  within  the  meaning  of  the  Arbitration  .\ct, 
1S99,  or  any  slat  itory  moditlcation  or  re-enactment  thereof  for  the 
lime  being  in  force,  the  provisions  w'  •  reof  >hall  apjily  as  far  as 
applicable. 

r  ^  That  this  Agreement  is  to  commence  with  sieamcrs  sailing 
from  their  first  loading  port  in  tht  U.  S.  A.,  on  or  after  April  ist, 
i(j05,  and  to  remain  in  force  until  ancellcd  by  any  of  the  parlies 
thereto  giving  six  months'  written  no''ce  of  their  de-ire  to  with- 
draw, such  notice  not  to  be  given  previ<ais  to  ist  day  of  July,  1906. 

By  authority  of  B  arukr  &  Co.  Incd.,  Wai.tir  Cii  a.\ihi;rs. 

William  .-Vdxmson  &  Co..  on  behalf  of  Sni.ww  Tomks  &  Co 

Per  Pro.  T.  B.  Rovdln,  and  by  written  authority    -f  the  Ham- 
iu;rg  .\mi:rica  Line  and  the  Union  S.  S.  Co.  of  Hamburg 

P.  L.  Roopt-.K. 

For  Tin:  .\mi  •  ican  &  ORirNTAi.  Lixf.,  Howard 
Holder  &  Partners,  Ltd.,  Allx.  Frf.kland,  Director, 
General  Managers 

Wif'^ess  to  the  Signature-  of 

\Vu.  ,\i)AMSoN  &  Co.,  ]     L.  RoorKR,  and  Alex.  Freeland, 

.\KI  111).      ]\L\CLEAN. 

Anglo  .\mi.iu(an  Oil  Co.   Ltd., 
22,  Billiter  Street.  London,  K.  C. 


■;  t 


CHAPTER  X 

THE  I'ATLM^  MONOPOLY 


NClTK 

I"OR  scvrral  years  past  the  United  Shoe  Machinerj'  Company  has 
been  regarded,  and  with  reason,  as  the  foremost  example  of  a  Patent 
Monopoly.  This  eoncern  is.  moreover,  a  coml)ination,  since  prior 
to  iSgj  much  of  the  maeliinery  now  controlled  by  the  single  com- 
pany was  divided  amoi;g  four  concerns  and  was  therefore,  subject 
to  at  lea>t  limited  competition.  In  February  iSq;  the  United 
Shoe  Machinery  Company  was  organized  under  the  laws  of  the 
State  of  New  Jersey.  By  means  of  an  issue  and  exchange  of  its 
capital  >tock  it  took  over  the  business  of  four  concerns — the  Con- 
solidated and  McKay  Lasting  Machine  Company,  Goodyear  Shoe 
Machinery  Company,  McKay  Shoe  Machinery  Company  and 
Ei)])ler  Welt  Machine  Company.  Since  that  time  the  United  Shoe 
Machinery  Company  has  substantially  controlled  the  shoe  ma- 
chinery business  of  the  United  States  which  has  been  handled 
strictly  upon  a  lease  basis.  Powerful  as  the  company  has  been  it 
has  been  constantly  threatened  by  the  invention  of  new  tjpes  of 
shoe  machinery.  Frequently  it  has  been  comjK'lled  to  buy  out  such 
potential  competitors,  often  at  high  valuations.  The  license  or 
lease  system  of  tiie  United  Shoe  Machinery  Comi)any  is  shown 
below  in  the  exhibits  by  a  typical  h'ase  contract.  There  has  also 
been  included  another  typical  lease  or  license  agreement,  that  of 
(he  Motion  Picture  Patents  Company  and  one  of  the  Crown  Cork 
and  Seal  Com!)any. 

The  la-t  exhibit  in  this  chapter  consists  of  excerpts  from  the 
decision  handed  down  in  March  iqi2  in  the  so-called  Dick  case. 
Inlluenlial  as  was  the  decision  in  the  Dr.  Miles  Medical  Company 
case,  in  restricting  the  tendency  toward  monopolistic  control  so 
far  as  the  conditions  and  terms  of  sale  have  reference  to  uniiatentcd 
articles,  the  Dick  case  g<ies  the  full  length  in  the  opposite  direction 
and  upholds  in  the  .nost  sweeping  language  the  power  of  concerns 
and  individuals  holding  i)atenls  to  impose  whatsoever  conditions 


The  Patent  Monopoly 


2.^i) 


they  may  deem  fit  upon  the  use  of  artieles  covered  hy  such  i)atent> 
or  apiilications.  The  (lissentin<^  (jpiiuoii  rendered  by  Mr.  Chief 
Justice  White  and  concurred  in  by  Mr.  Ju>lice  Huj^'hes  and  Mr. 
Justice  Lamar  condemns  in  no  uncertain  terms  the  doctrine  thus 
laid  down,  chietly  on  j^rounds  of  j^cneral  ])uij!ic  policy.  This  deci- 
sion was  not  rendered  by  a  full  itench,  ^Ir.  Ju'  tice  Day  tal<in,[;  no 
part  in  the  decision,  while  tiic  \acancy  cau.-ed  by  the  death  of 
Mr.  Justice  Harlan  remained  still  uiifilled.  Hence  as  beinc;  a  four 
\n  three  decision  it  was  really  a  minority  deci>i()n.  Petitions  for  a 
ni.earini^  have  been  filed  and  there  is  a  chance  that  the^e  may  be 
L'ranted.  Unfortunate  as  the  decision  appears  it  m;!y  nevertheless 
have  in  it  the  germs  of  much  good.  Tliis  arises  through  the  fact 
that  one  of  the  most  needed  things  at  the  present  time  to  check  the 
irndency  toward  monopoly  is  a  radical  reft^rm  of  the  Patent  Laws. 
The  tirst  step  in  this  direction  v,as  taken  by  President  Taft  on 
May  ID,  igi2  in  sending  to  Congress  a  message  asking  for  legisla- 
tion to  authorize  him  to  ai)])oint  a  commis>ion  to  investigate  the 
I'atcnt  laws  and  report  changes  necessary — Ed. 

Exhibit  i 

i  i: ase  and  licen'sk  acreemknt  of  the  united  shoe  machinery 
comi'any  for  certain  maciiim.s  ' 

(ioodyear  Department.  [Form  .^L  d.  J.,  6-806.] 

Lease  and  License  Agreement  Xumher . 


SEWING  AND  STITCHING  MACHINES. 

rhi=;    <;recment  made  at  Boston,  in  the  State  of  \Lissachu.setts, 

thi>   - — day  of ,  ig — .  between  the  I'nited  Shoe   Machinery 

Company,  a  cor]iorati()n  organized  under  the  laws  of  the  State  of 
.Maine,  having  an  otTice  in  said  Boston,  hereinafter  referred  to  as 
the  lessor  of  the  one  part,  and  — ,  of ,  in  the  State  of ,  here- 
inafter referred  to  as  the  lessee,  of  the  other  part: 

Witncsseth  that  the  lessor,  in  consideration  of  the  covenants 
iiiil  agreements  on  the  part  of  the  Ic-.-ee  herein  contained,  does 

'  Unitrd  States  of  Amcrira  v.  United  Shoe  Machinery  Company  ..\m\  others. 
I'ctitidn,  In  thi-  Circuit  Court  of  ihc  Unilfd  Suifs  lur  the  Dioiritl  oi  2tlasia- 
(.ha-elts,  E.xliibil  5,  pp.  113-120. 


I 


2^0 


IXUUSrk]\L    CuMBIXATIONS    AND    TkUSTS 


he.-ihy  lease  to  and  license  the  lessee  under  an>  kllers  patent  In- 
lon^nn^  to  the  lessor  or  vmIvv  which  the  les>or  has  the  right  to 
grant  such  license  aiTecting  any  inventions  which  arc  now  or  here- 
after shall  be  embodied  therein  or  employed  in  the  operation  thereof, 
to  use  the  machine  or  machines  oi  the  "Coodyear  iXi)artment 
of  the  lessor  designated  by  number  or  numbers  in  the  following 
schedule,  viz; 

SCIIKDI  I.K  OF   M ACIIINKS. 

Goodyear  Welt  and  Turn  Slioe  Machine,  No. 
Goodyear  Universal   Inseam   Sewing   Machine,  No. 
Goodyear  Outsole  Rapid  Lockstitch  Machine,  No. 
Exteiision  Kdge  Attachment  (A),  No. 
Extension  Kdge  Attachment  (B),  No. 
Welt   BcMlling   Attachment,   N(x 

and  any  duplicate  parts,  extras.  mc~hnnisms,  and  devices  relating 
thereto,  or  u^ed  in  connection  therewith,  now  attached  to  or  deliv- 
ered with  the  said  de.-ignated  machine  or  machines,  or  which  may 
at  any  time  hereafter  be  obtained  front  the  k--)r  or  be  added 
thereto,  by  or  with  the  consent  of  the  le^s^)r  (the  whole  of  which 
machine  or  machines,  duiilicate  parts,  extras,  mechanisms,  and 
devices  held  by  the  lessi  e  under  the,-e  presents,  whether  now  or 
hereafter  delivered  to  or  in  the  po^-es-ion  ol  the  le--ee,  is  herein- 
after referred  to  a-  the  "leased  inai  hinery"),  subject  to  the  condi- 
tions hereinafter  contained;  .md  the  !e>>or  hereby  grants  to  the 
le.-see  a  li  :ense  to  u>e,  in  conrction  with  welted  boots,  shoes,  or 
other  footweai  made  by  the  l.--re,  the  welt-  of  which  have  bet'n 
sewed  to  tluir  ujipers  wh  illy  Ijy  Goodyear  Well  and  Turn  Shoe 
Maciiine-  or  by  (loociyear  Universal  in--eam  Sewing  Machine-, 
hereby  leased  or  no,v  he  1(!  by  the  lessee  under  lea^'  from  the  le-Mir 
heretofore  executed,  .md  the  outsoles  of  which  ha\e  been  stitclnd 
lo  tlieir  we!t>  wholly  by  (loodyear  Outsole  Rapid  Lock-Stitdi  Ma- 
chines, hereliv  leaM'd  or  now  Ik  Id  by  the  lessee  under  lea-c  from  the 
lessor  heretofore  executed,  tin-  tr;ide  name  or  trade-rnirk  '•Good- 
year Welt,"  and  lo  u-e,  in  connection  wiih  turned  boot-,  >hoes,  or 
other  footwear  made-  l>y  the  li-sMr  the  >c>le>  .  which  liaNc  been 
attached  to  tlieir  ujjpiTs  wholly  by  tiie  U>e  of  Goodyear  Welt  and 
Turn  Shoe  Machines  or  Goodyear  Universal  Inseam  Sewing  Ma 
chines,  hereby  leased  or  now  hc^M  liy  the  lessee  under  le.ise  from  tin 
lessor  heretofore  executed,  tlic  tr.ule  name  or  tr.ule-niark  •'CkmmI 
year  r.irn." 


TnK  Patkm  Mcjncjpoly 


And  that  the  followinfj  arc  agreed  to  as  conditions  of  this  agree- 
ment, all  (.f  which  the  lessee  coiivenanls  and  agrees  to  keep  and 
perfnrni: 

I.  The  leased  machinery  shall  at  all  times  remain  and  lie  the  sole 
and  e.\clusi\e  i^roiierty  of  the  le>,>or  and  the  lessee  shall  have  no 
ri<;ht  of  i)ro[)erty  therein,  hut  only  tl'.e  ri.u'ht  to  use  the  same  upon 
the  conditions  herein  contained.  The  lea-ed  machinery  shall  be 
u~ed  only  by  the  le--ee  himself  t)r  by  opiTa'ives  in  his  direct  employ, 

and  only  in  the  factory  now  occupied  liv  him  at ,  in  the  State 

"f ,  unless  the  les.-or  shall,  by  an  instrument  in  writing  signed 

by  its  [ire-ideiit,  vice  i)resident,  or  treasurer,  authorize  the  lessee  t'  • 
ii move  th"  leaded  machinery  and  to  use  the  same  el>ewhere.  The 
IraM'd  machinery  >hall  not  be  transferred  or  delivered  or  sublet  to 
..:iy  other  perMin  or  corporation,  and  neither  this  agreement  nor  the 
lr,i>e  nor  the  license  hereby  granted  :n  be  assigned  by  the  lessee 
by  his  own  act  or  by  ojieration  of  law.  If  the  lessee  becomes  inst)l- 
vent  t)r  bankrupt,  or  has  a  receiving  order  made  against  hin,,  or 
makes  or  e.xecutes  any  bill  of  sale,  deed  <ji  trust,  or  assignment  for 
the  benefit  of  his  creditors,  or  if  a  sale,  mortgage,  lease,  or  unauthor- 
i  1(1  reniov;''  of  the  leased  machinery  or  any  ])art  thereof  be  maile  or 
.iilempted,  or  if  any  distress  or  executinn  or  attachment  be  levied 
thereon,  then  and  in  each  such  ca-e  any  oi  all  leases  of  or  licenses 
t)  use  machinery  then  existing  between  the  lessor  and  the  lessee. 
whether  as  the  result  of  assignment  to  the  lessor  or  otherwise, 
shall,  at  the  optum  ot  the  lessor,  cease  and  determine,  and  the  pos- 
session of  and  full  righi  to  and  control  nf  all  machinery  the  leases 
ur  licenses  of  which  are  so  terminated  sh.ill  thereuj)on  revest  in  the 
lis-or  free  from  all  claims  and  dimands  whatsciever.  The  lessur 
and  its  agents  and  em|)loyees  shall  at  all  times  be  gi\t  n  access  to 
the  ieascil  m.u  hin<Ty  for  the  purpose  of  inspecting  it  or  w.itihing 
its  use  auvi  ojji-r.ition.  or  of  altering,  rejiairing.  imi)ri)\  ing,  (.r  adding 
tti  it,  or  determining  the  naturt-  or  extiat  of  its  use.  ami  the  lessee 
shall  alTi.rd  all  reasonable  facilities  therefor. 

J.  The  lessee  shall  at  all  times  and  at  his  own  i  \ptiise  keej,  the 
leased  machinery  in  good  and  ethcieiit  working  order  and  (ondition 
and  shall  not  pirmit  anyone  to  injure  or  deface  or  remo\e  any 
plate  or  dates,  numbers,  or  other  inscriptions  now  or  here.ifter 
impressed  on  or  affixed  lo  the  leased  machinery'  by  the  K-sor.  The 
lessee  shall  ol)tain  from  the  lessor  exclusively,  and  shall  pav  there- 
for at  tin  rigul.tr  priies  fron)  lime  t(,  tiuH'  established  by  the  lessor, 
all  the  duplicate  parts,  e.xtrus,  mechanisms,  and  devices  of  t  very 


ii 


25-'  Industrial  t'oMDiNAiioNs  amj  Trl'sts 

kind  needed  or  u>ed  in  ujierutinj:,  repairing,  or  renewing  the  leased 
machinery,  and  the  same  -hall  form  part  (.1  the  lea-ed  machinery, 
and  the  I'ssee  shall  not  otherwise  make  or  allow  tobe  ni.,dc  any 
addition,  subtraction,  or  alteration  U>.  fri>r.-i,  ..r  iii  the  lea;C(. 
machinery    nor    interfere    with    the    j^roper    operation    of    the 

•^anie.  .,    ,  .      . 

^.  rhe  leaded  machinery  shall  at  all  t'mes,  until  the  expiration 
or  termination  of  the  lease  thereof  and  license  to  use  the  ;.amc  hereby 
granted  and  the  redelivery  of  the  leased  machinery  into  the  posses- 
sion of  the  lesM.r  as  hereinafter  provided,  be  held  at  the  sole  risk  of 
the  lessee  from  injury,  loss,  or  destruction,  urd  in  ca.-e  any  welting 
or  -titching  or  sewing  machine  or  mi-chines  hereby  lease  1  shall  be 
lo.-,t  or  destroyed  by  lire  or  otherwise  before  such  ■■vrration  or  ter- 
mination and' redelivery,  the  les-c'  >hall  pay  to  'he  li-xr  in  resiiect 
to  each  svich  machine  ^'o  lost  cr  d-stroyed  the  sum  of  two  hundred 
and  twenty-live  (225)  dollars  as  partial  reimbur^ement  to  the  lessor 
lor  such  loss  or  destruction,  and  the  lessee  shall  fnrlhwith  return 
whatever  remain^  of  all  the  machinery  <o  lost  or  de:>troyi'd  to  the 
lessor  at  Htverlv,  Massachusetts. 

4.  The  le--ee'shall  pay  all  taxes  and  assessments  which  -hall  be 
assessed  in  respect  to  the  lea^'d  machinery  or  other  machinery  of 
the  lessor  held  by  the  lessee  under  Kmm'  or  license  uiMm  whomsoever 
assessed.  All  taxes  or  as>essments  in  re^jiect  to  lea-es,  licenses,  or 
agreements  covering  machinery,  ov  the  rights  to  payments  there- 
under, -hall  be  ddi-trued.  lor  the  jjurposes  of  this  article,  to  be 
a>>e--ed  in  respect  to  the  machinery  itself.  In  case  at  any  time  an\ 
unai)portioned  tax  or  ass?ssnienf  shall  be  assessed  to  the  le.ssor  in 
respect  in  pari  but  not  wholly  to  machinery  of  the  lessor  in  the 
possession  <il  the  lessee  the  lessee  shall  pay  to  the  lessor  suili  pr  )- 
portionale  jv.rt  of  the  total  amount  of  said  unipportioned  t,i\  ur 
a>sessmepi.  as  the  fair  valuation,  to  be  determineil  by  the  lessor,  ol 
said  machinery  of  the  lessor  in  the  possession  of  the  lessee  bears  to 
the  fair  valuation,  to  be  determined  by  the  lessor,  of  all  niachiner;. 
(excepting  machinery,  if  any,  in  the  lessor's  own  posses>ic'.i;  in 
re>[)ect  to  whiJi  the  unapporlioned  tax  or  assessment  ha.-  beer, 
assessed:  P.  nidcd,  liowner.  That  if  such  un apportioned  tax  or 
assessment  includes  any  tax  or  assessment  in  respect  to  tangilile 
property  in  the  lessor's  own  iiosscssion  the  amount  thereof,  based 
at  the  established  rate  upon  tlie  fair  valuatiwii,  to  be  determined  by 
till'  lessor  of  such  i)roperty,  shall  lir>^t  be  deducted  and  the  !  -see 
shall  pay  his  proiwrtionatc  part  as  aforesaid  of  the  balance  only  of 


The  Patkxt  Mo.nop.  )lv 


253 


.-aid  un;i[)iX)rti,>ned  tax  or  asicssmcnl  after  such  deduction  ha^  l)ccn 
rnadc. 

5.  The  leased  machinery  shall  be  used  only  in  the  manufacture 
of  bo'^ts,  shoes,  and  otlu  r  fontv;e:ir  nKidc  by  the  lessee  known  in  the 
trade  a>  "(nHidycar  Welt^,"  v, h'ch  have  been  or  are  to  be  welttd 
whoU)  by  (Joodyear  Well  and  '1  urn  Shoe  M;".chines  or  (ioodyear 
Universal  Inseam  Se\vin<;  Machines  held  by  the  Icr-sce  under  lease 
from  the  lessor,  and  the  soles  of  which  have  been  or  are  to  be  at- 
tached to  their  weltswhoily  by  Goodyear  Outsole  Kai'i'l  Lock-Stitch 
Marhines  held  by  the  U --ee  under  lease  from  the  lessor,  or  in  the 
manu'-ct  re  of  bo()ts,  slioes,  or  other  footwear  made  by  the  lessee 
knouii  in  uic  trade  as  "tioodyear  Turns,"'  the  soles  of  which  have 
been  or  are  to  be  attached  to  their  uppers  wholly  by  doodyear  Well 
and  'I'urn  Slioe  Maciiines  or  Goodyear  UniwT'-al  In^eani  Sewing 
Machines  held  by  the  les>ee  under  lea^e  from  the  lessor.  Tiie  leasee 
shall  not  represent  or  sell  as  "Goodyear  Welt>  "  .my  boots,  shoes, 
or  other  footwear  which  are  not  welled  wholly  Ijy  the  use  of  Good- 
year \\elt  and  Turn  Shoe  Machines  or  (ioodyear  Universal  Inseam 
Sewinfj;  Maciiines  held  under  lease  from  the  lessor,  or  the  soles  of 
vhich  are  not  attached  to  their  welts  wholly  by  the  use  of  (ioodyear 
outsole  rapid  l(Kk-stitch  machine'-  luid  under  lease  from  the  lessor 
or  as  "Goodyear  Turns"  any  boot>.  -hoe--,  or  other  footwear  the 
M)Ies  of  which  are  not  attached  to  tluir  up[)ers  wholly  by  the  use  of 
(ioodyear  Well  and  Turn  Shoe  Machines  or  (ioodyear  Universal 
Inseam  Sewinj;  Machines  held  under  lease  from  wie  lessor,  Th* 
lessee  shall  use  the  leased  machinery  to  its  full  capacity  in  the  maini- 
facture  Oi  "(ioodyear  Welts"  and  "Goodyear  Turns,"  limited 
only  In'  the  number  of  welled  and  turned  boots,  shoes,  and  othei- 
foorwear  made  by  or  for  him. 

b.  The  lessee  shall  pay  to  the  lessor  throughout  the  full  term  of 
this  agreement  the  resjiective  amounts  set  forth  in  the  following 
schedule  in  respect  to  each  pair  of  welted  boots,  -hin -.,  or  ot'.er 
footwear,  or  portions  thereof,  manufattared  or  pre;).;re.I  by  or  for 
the  lessee,  which  --hall  have  been  welted  in  whoU'  or  in  part  nv  the 
soles  of  which  -hall  have  been  in  whole  or  in  p.irt  .ill  iclud  to  welts 
hy  the  use  of  any  welting  or  --t itching  or  se»ving  machinery,  and  in 
respect  to  each  pair  of  "turned'  boots,  shoes,  or  other  footwear, 
or  iM)rtionb  ihereof,  manui.ictured  or  prepared  by  or  for  the  lessee, 
the  soles  of  which  sh.ill  h,i\  e  been  sewed  ot  .itt.iched  to  the'r  u[)i)ers 


in  wh 
viz: 


!o  or  in  p.irl  bv  the  u--e  of  any  >ewing  or  slilchiiig  ni.u  hinery, 


1. 

1; 


i 


! 


254 


Industrial  Combinations  and  Trusts 


Schedule  of  paymcvt^  per  pair. 


Sizes. 

Welts. 

Turn 

Form  \o.— 

To  \o.— 

Children's 

Misses'  

I 
9 

loj^'j,  inclusive 

''\     "     

and  over 

3  cents.. 

4  cents. 
6  rents. . 
4  cents. . 
6  cents   . 
8  cents. . 

1       cent. 
i>^  cents. 
lyi  cent- 

\'oulhs' 

13><,  inclusive 

and  over 

lyi  cent 

Bovs' 

i>i  cents. 

MJn's           

I  'A  cents. 

Such  payments  shall  be  ma(k'  on  the  la-t  day  of  i-acli  caliiui.. 
month  in  respect  to  all  such  hoots,  shoes,  and  other  I'ootw  ar  manu- 
factured or  prepared  by  or  for  the  Ie^^ee  during  the  next  precedinj; 
calendar  month:  Provided,  hon-ever.  That  in  all  cases  uhi-n  ihr  lessee 
shall  pay  to  the  lessor  on  or  before  the  fifteenth  day  of  the  calenilar 
month  the  amount  due  pursuant  to  the  schedule  in  this  article 
hereof  contained  for  the  next  precedinji;  calendar  month,  the  lessor 
will,  in  consi('eration  of  such  proiTpt  i)ayment.  p;rant  a  discount  of 
lifty  per  cent  from  the  amount  so  due  for  such  preceding;  calendar 
month.  The  lesset',  howc  ver.  guarantees  that  the  payments  made 
in  accordance  with  tl;e  fonj^'ointj  schedule  of  payments  under  this 
aojreement  in  res])ect  to  boots,  shoes,  or  other  footwear  o|)erafeil 
upon  by  the  we!tin<^,  stitching,  or  sevving  machines  lureby  lea-ed 
(after  deducting  all  abatements)  shall  amount  in  eat  h  caleiKLir 
year  to  at  least  fifteen  dollars  (Si-;)  for  each  calendar  month  for 
each  ^'  citing  or  stitching  or  sewing  machine  hereby  leased,  and  ai 
the  end  of  each  calendar  year  the  K:-.ee  -hall  pay  ti»  the  lessor  the 
amount,  if  any,  by  whiih  the  t'Hal  of  such  |)ayments  for  said  year 
is  less  than  such  guar.ml'  ed  amount.  .\ll  j/;iynients  and  the  guar- 
antee in  this  agreeiiu  nt  pro\ide(l  for  are  independent  of  and  in 
addition  to  all  i)aynie!it-  and  guar.inlee--  ]iro\  uled  for  in  a\\\  <itiur 
leases  or  licensi-.s  or  .ii;reemenls  iielween  the  lessor  and  the  lessee: 
Provided,  lunvrver.  That  (exce|)ting  in  so  far  as  is  rei|uired  by  the 
guarantees  herein  contained  or  contained  in  other  lea.--e  and  license 
agreements  between  the  lessor  and  the  lessee),  in  case  under  any 


The  Patent  Monopuly 


^i:> 


other  -Goodyear  Department"  lease  and  license  agreement  between 
the  lessor  and  the  lessee  covering  .  e  or  more  Gocjdyear  Wilt  jnd 
Turn  Sh(H  Machines,  Goodyear  I  niversal  Inseam  Se\ving-Ma- 
chines,  or  Goodyear  Outsole  Rapid  Lock-Stitch  Machines,  the 
l.ssee  shall  have  paid  to  the  lessor  the  amount  set  forth  in  the 
schedule  of  payments  in  such  iea-e  and  license  agreement  contained 
in  n  pect  to  anypair  of  hoots,  >h()es,  or  ..ther  footwear,  then  the 
lessee  shall  be  relieved  i  om  said  ijaymenl  hereunder  in  respect  to 
that  pair  -     hoots,  shoes,  or  other  footwear. 

7_.  The  le-^or  may  attach  to  the  leased  machinery,  or  anv  thereof, 
an  indicator  nr  indicators  to  register  the  number  of  revolutions  or 
movements  ol  any  part  or  parts  thereof,  and  th     lessee  shall  not 
.illovv  any  person  (other  than  the  les<-r  or  its  agents)  to  disturb  or 
intenore  with  such  indicator  or  indicators.    In  case  any  indicator 
thus  attached  shall  from  any  cause  ceas^  to  correctly  indicate  or 
register,  or  shall  be  rli^turbed  or  out  ..i  repair,  or  if  the  glass  cover- 
ing any  such  indicator  shall  be  removed  or  broken  «>.  injured,  then, 
and  as()ften  as  the  same  shall  happen,  the  lessee  sh  ill  immeduitelv' 
by  writing,  notify  the  lessor  and  at  the  .-^ame  lime  e.\i)lain  the  cir- 
cumstances under  which  the  same  has  happened.    In  ca^e  any  such 
indicator  ceases  to  indicate  or  l)ecomes  or  remains  inaccurate. 'or  tiie 
glass  covering  becomes  or  remains  removed,  broken,  or  injured, 
because  of  any  fault  of  the  lessee  or  anyone  in  his  employ,  or  because 
of  the  failure  of  the  lessee  to  give  pnuiijaiv  the  notice  "hereinbefore 
provided  for.  then,  without  i)rejudice  to  any  other  rights  or  reme- 
dies of  the  lessor,  the  lessee  shall  i)ay  the  le-sor.  \  ithout  the  right  to 
any  discount,  eight  cents  per  pair  '"or  eu  h  pair  of  boots,  sh(HS,  or 
"I her  footwear  or  portions  thereof  in  the  manufacture  of  which  the 
!>  iM(l  machinery  or  any  part  thereof  shall  have  been  used.     The 
I'    -ee  shall  keep  full  and  accurate  accounts,  independently  of  ar  • 
1    iicators  th.tl  may  be  placed  upon  the  leased  machinery,  showing 
l!ie  number  and  kimi  of  boots,  shoes,  and  other  footwear  or  portions 
thereof  manuf.ulured  or  -prepareil  by  or  for  the  le-see  whvh  have 
!"in  welted  in  whole  or  in  pi      or  the  -oles  of  whii  h  have  been  in 
V.  hole  or  in  part  att.icheil  to  welts  by  the  u-e  of  welting  or  stitching 
or  sewing  m.n  hinery,  and  of  turned'li.iotv  shoe>,  or  other  footwear 
nr  |)orti(^ns  thereof  manul.atured  or  pn ,  ared  by  or  for  the  lessee 
Ihe  solef.  ot  which  have  been  sewed  or  attached  to  their  uppers  in 
whole  or  in  i)art  by  Ih,-  u^e  of  ^ewing  or  stitching  machinery,  and 
shall  allow  the  les.-or  at  ,iil  times,  by  its  agents  or  atlornev-;,  to 
examine  and  to  take  <  opii-,  of  sulIi  accounts  ami  entrie->  of  ihe'lessee 


"ii' 


B 


2^6 


Industrial  Combinations  and  Tkusis 


as  may  serve  to  determine  the  total  number  of  such  boots,  shoes, 
or  other  footwear  or  ])urtions  thereof;  and  the  lessee  shall  i)roduce 
all  such  accounts  and  entries  upon  re(|ue.  t.  The  le:-see  shall  require 
each  of  his  i)[)Lrat(ir3  uium  the  leased  machinery  or  any  i)art  thereof 
to  keep,  upon  blanks  or  blank  books  to  be  furnished  by  the  lessor, 
accurate  daily  records  of  the  number  and  kind  of  boots,  shoes,  and 
other  footwear  or  portions  thereof  in  the  manufacture  or  prcpara 
tion  of  which  he  has  used  the  leased  machinery  or  any  part  thereof, 
and  shall  require  his  operators  to  -i.un  such  record  -,  and,  if  retiue^Aed 
so  to  do  by  the  les>or,  shall  verify  the  same  under  oath.  The  lessee 
shall  send'to  the  olTice  of  the  lessor  in  Bo>U)n,  on  or  bi'lore  the  I'lfth 
day  of  eacli  calendar  month,  the  ori^n'nal  records  for  the  next  pre- 
cedinj^  calendar  month  kejjt  by  his  operators  as  above  (irovided  for. 
and  in  case,  in  any  calendar  month,  any  one  or  more  of  the  machines 
hereby  lea>ed  has  been  entirely  idle,  the  lessee,  on  or  before  the  fifth 
day  of  the  next  succeeding  cal  -ndar  month,  shall  send  to  the  oflice 
of  the  lessor  in  Boston  the  blank  for  said  month  for  each  ^uch  idle 
machine  marked  "not  in  use"  and  si.s^ned  by  the  lessee.  The  1^--^- 
shall  also  furnish  any  further  information  which  in.iy  be  called  !or 
in  rek'tion  to  the  leased  machinery  or  the  use  tliereof. 

And  that  the  following  stii>ulations  and  provisions  are  agreed  to: 
8.  If  at  any  time  the  lessee  shall  tail  or  cease  to  use  exclusively 
\velt--ewin<r  and  .lUtxile  stitching  machinery  held  by  him  under 
lease  from  tlu'  le.---or  in  the  manufacture  of  all  welted  b(jots,  shoes, 
or  other  footwear  made  by  or  I'or  him,  the  v/elts  or  soles  of  which 
are  sewed,  stitched,  or  attached  by  the  aid  of  machinery,  or  shall 
fail  or  cease  to  use  exclusively  turn-sewing  machinery  held  \>y  him 
under  lease  from  the  lessor  in  the  manufacture  of  all  turned  boot>, 
shoes,  or  other  footwear  made  by  or  for  him,  the  soles  ol  wh.ich  are 
sewed  or  att.ulud  by  the  aid  of  machinery,  the  le.-sor,  although  it 
may  have  wai\  i  d  or  ignored  prior  in.stances  of  such  failure  or  cessa- 
tion, may  at  its  option  terminate  forthwith  by  notice  in  writing 
any  or  all  leases  of  or  licen-  >  to  use  machinery  then  existing' 
between  tlie  les. or  and  the  le,^:3ee,  whether  as  the  re^^ult  of  assign- 
ment to  the  lessor  or  otherwise,  and  the  possession  of  and  full  right 
to  and  control  of  all  machinery  the  lease  or  license  of  which  is  so 
terminated,  shall  thereupon  revest  in  the  lessor  free  from  all  claims 
and  demands  whatsoever. 

Q.  The  term  of  this  agi.ement  >\\A\  be  seventeen  year  from  the 
date  hereof.  The  lease  ol  the  leased  mac  .inery  and  license  to  u~f 
the  same  hereby  granted  shall  continue,  unless  so(>ner  ttrminatrd 


The  Patent  Muxopoly 


-'57 


by  the  lessor,  as  in  this 


c  lessor,  as  in  this  agreement  [irovifleci,  for  the  full  term  of  this 
ii,'reenu'nt,  but,  if  any  breath  i.r  ilelault  >hall  be  made  in  the  observ- 

the  conditions  in  this  a:;recment  con- 


ance  of  any  one  or  more  o 

tained  or  contained  in  any  other  lease  or  license  a.i^reement  sul> 
s'\tin<>;  between  the  lessor  and  the  lessee,  whether  as  the  result  of 
a-si.unment  to  the  lessor  or  otherwise  and  expressed  to  be  obligatory 
ujHin  the  lessee,  the  lessor  shall  have  the  right,  by  notice  in  writing 
t(i  tlie  lessee,  to  terminate  forthwith  any  or  all  leases  of  or  licenses 
ti)  use  machinery  then  in  force  between  the  lessor  and  the  lessee, 
whether  as  the  result  of  a>signment  to  the  lessor  or  otherwise,  and 
this  notwithstanding  that  previous  breaches  or  defaults  may  have 
been  unnoticed,  wa.ived,  or  condoned  by  or  on  behalf  of  the'lessor. 
ll.  upon  the  e.\[)iration  of  the  full  term  o'f  this  agreement,  the  lessor 
does  not  re(iui.-t  the  return  of  the  lea^^e(l  machinery,  then  the  leased 
machinery  shall  continue  to  be  held  and  u~ed  under  and  in  accord- 
ance with  tlie  conditions,  stijiulations,  and  provisions  in  this  agree- 
ment contained,  and  \h\>  agreement  and  the  lease  and  license  herein 
contained  >hall  thereupon  l)e  extended  indefinitely  as  to  term;  but 
thereafter  either  tlu-  I'-sre  or  the  lessor,  upon  sixty  days"  notice  in 
writing  to  the  other,  may  terminate  this  agreement  and  the  lease 
and    license   herein   contained,    whereupon   the   leased   inachinery 
>hJ\  be  delivered  forthwith  to  the  lessor,  as  hereinafter  provided. 
Ipon  liie  expiration  of  tiiis  agreement  or  any  extension  thereo'  or 
the  termination  of  the  lease  and  license  herein  contained,  the  lessee 
-liall  forthwith  deliver  the  lea>ed  machinery  to  the  lessor  at  Bevt  rly, 
M.i>-,ichuselts,   in  good   order,    reasonal'le   wear  and   tear  alone 
e\>epted,  and  shall  thereupon  [)ay  to  the  le>sor  without  prejudice 
to  any  other  rights  or  remedies  of  the  lessor  such  sum  as  may  be 
ne(essary  to  put  the  leased  machinery  in  suitable  order  and  condi- 
tion to  lease  to  another  lessee.     The  les>ee  for  him^-elt.  his  heirs, 
•  ucutors,   and   administrators,   successors,   .iiul   assigns,    hereby 
grants  to  the  les.sor,  its  successors  and  assigns,  full  right,  jxiwer, 
•ind  authority  up(      such  expiration  or  termination  and  without 
1  iijjdice  to  any  ot.ier  rights  or  remedies  of  the  le>-or  to  enter  upon 
tile  premises  and  inlo  any  factory,  room,  or  any  place  wh.ere  the 
ItMSfd  machinery,  or  any  part  thereof,  may  be,  and  take  possession 
tlieieof,  and  take  away  the  -ame;  and  in  no  case  shall  the  lessee 
Have  any  claim  for  the  repayment  or  otTset  of  any  sum  or  sums,  or 
any  part  thereof,  which  shall  have  been  paid  under  this  agreement 
r  in  re3i)ect  to  the  lease  or  license  herein  contained,  or  in  anywise 
in  resjMict  to  the  leased  machinery. 


^N 


3 


258 


Industrial  Combixatioxs  and  Trusts 


o.  Upon  the  expiration  of  this  agreement,  or  any  extension 
thereof,  or  the  termination  of  the  lease  and  license  henby  granted, 
the  lessee,  in  addition  to  all  other  payments  in  this  agreement  pro- 
vided for  and  without  prejudice  to  any  other  rights  or  remtdics  ul 
the  lessor,  shall  pay  to  the  lessor  in  respect  to  each  welting  or 
stitching  or  sewing  machine  hereby  leased  the  sum  of  one 
hundred'  and  fifty  (150)  dollars  as  partial  reimbursement  tu 
the  lessor  for  deterioiation  of  the  leased  machinery,  expenses 
in  connection  with  the  installation  thereof,  and  instruction  of 
operators. 

11.  A  notice  in  writing,  signed  by  the  president,  a  vice  president, 
the  treasurer  or  the  assistant  treasurer  of  the  lessor  or  by  any 
assignee  of  the  lessor's  rights  hereunder,  and  posted  by  prepaid  let- 
ter, addressed  to  the  lessee  or  delivered  at  his  usual  or  last-known 
place  of  abode  or  business,  that  the  lease  and  license  hereby  granted 
is  terminated,  or  shall  be  terminated  at  the  expiration  of  a  certain 
period,  shall  be  a  sufTicient  termination  of  the  lec.<i-  and  license  from 
the  time  of  posting  or  delivering  such  notice,  or  from  the  exjjiration 
of  the  period  then  in  mentioned,  as  the  ca>e  may  be.  Any  termina- 
tion of  the  lease  and  license  hereby  granted  shall  be  without  prej- 
udice to  any  rights  or  remedies  which  the  lessor  may  have  lor 
violation  of  contract,  use  of  machines  without  right,  use  of  patented 
inventions  without  license  or  otherwise. 

12.  The  lessee  admits  the  validity  for  the  full  term  expressed  in 
the  grant  thereof  (and  e-  Ty  extension  and  renewal  thereof)  of  each 
and  every  of  the  Lettei  "alent  of  the  United  States  of  .Xmerica 
uwned  by  the  k-M.r  or  under  which  it  is  licensed,  any  of  the  inven- 
tions of  which  are  or  hereafter  may  be  embodied  in  the  leased 
machinerv,  and  the  validity  of  and  title  of  the  le.-sor  to  the  exclu- 
sive ownership  of  the  trade  names  or  tratle-marks  "  Goodyear  Welt" 
and  "Goodyear  Turn"  used  in  connection  with  boots,  shoes,  and 
other  footwear.  The  lessee  also  agrees  that  he  will  not  dire<:tly  or 
indirectly  infringe  or  contest  the  validity  for  the  full  t.rm  t\i,re--sed 
in  the  grant  thereof,  or  of  any  extension  (  r  renew  .1  thereof,  of  any 
of  the  Letters  Patent  referred  to  in  the  "Schedule  oi'  Patents" 
hereto  annexed  or  the  title  of  the  lessor  thereto,  and  that  he  will 
not  directly  or  indirectly  infringe  or  conU'St  the  validity  of  or  the 
title  of  the  lessor  to  the  said  tratle  names  or  trade-marks  "  Goodyear 
Welt"  or  "Goodyear  Turn."  The  expiration  of  this  agreement  or 
any  extension  thereof  or  the  lernunalion  c  cesser  of  the  lea>e  an'! 
license  hereby  gr;i.nte(l  shall  not  in  any  way  affect  the  provi^ion>  0! 


J 


The  I'atknt  Monopoly 


259 


this  clause  or  releiise  or  dischurj,'c  the  lessee  from  the  admissions 
•tiiii  estopi)els  herein  set  forth. 

I?.  None  of  the  conditions,  stipulations,  or  provisions  of  this 
agreement  sluill  be  lield  lo  lime  been  waived  by  any  act  or  knowl- 
ed,£;e  of  the  le.-sor,  its  a^'nts  or  employees,  but  only  by  an  instru- 
nunt  in  writing,  signed  by  the  president,  a  vice  president,  or  the 
treasurer  of  the  lessor. 

i.|.  The  term  "lessor"  shall  include  the  said  United  Shoe  Ma- 
chinery Company  and  its  successors  and  assigns.  All  the  condi- 
tions, stipulations,  and  j^rovisions  binding  on  the  lessee  shall  be 
funding  on  and  enforceable  against  his  legal  representatives.  In  the 
lonstruction  of  this  mstrumcni  words  relating  to  the  number  and 
jjender  of  the  narties  shall  be  read  according  to  their  real  number 
and  gender. 

In  witness  whereof  the  parties  hereto  have  duly  executed  this 
iii.strument  in  duplicate  the  day  and  year  fust   above  written. 


(If  lessee  is  a  corporation,  add  corporate  seal.) 

[here    follows   SCHEDl'LE   OF    PATENTS.] 

Exhibit  2 
fxrnant.e  license  agreement  of  the  motion  pictltte  patents 


COMPANY 


Whereas  the  Motion  Picture  Patents  Co.  of  New  York   City 

":(r(ina*'ter  referred  to  as  the  "Licensor")  is  the  owner  of  all  the 

ri^ht,  title    and  interest  in  and  to  reissued  Letters  Patent  No. 

i-KU,  dated  January  12,  1902,  granted  to  Thomas  A.  Edison,  for 

kineloscojMC  film,  and  also  Letters  Patent  Xos.  578185,  58074Q, 

.v'^^Q.^.^-  5''^''^9i^.  tJ73.^29.  (^7.509".  7O70,S4.  7^2382,  744'\Si,  770Q37, 
;;ijSo,  7S5205,  and  7852,5},  for  inventions  relating  to  motion- 
i'iiidre  projecting   machines;  and 

Wlureas  the  Licen.sor  has  licensed  the  American  Mutoscope  & 
liii;;raph  Co.  of  New  'S'ork  City,  the  Edison  Manufacturing  Co.  of 
"'.iiiiie,  N.  J.;  the  Essanay  Co.  of  Chicago;  the  Kalem  Co.  of 
\'  ^v  NOrk  City;  George  Kleine  of  Chicago;  Lubin  Manufacturing 
I    -    >il   I'hiladelpliia;  I'athe   Kreres  of  New  York  City;  the  Selig 

Hi'arinjis  l)cfore  the  t'ommittce  on  Inlcrstato  Commerce,  United  States 
Senate,  bznd  ("oAi;.,  ind  Sess.  iqii-iqu,  Kxhibit  .\.  pp.  1338-41. 


r 

I   !  ! 


lit 


Hi- 


2bO 


Industrial  CuMBiNAnuNs  \nu  Trusts 


Polyscope  Co.  of  Chicago;  and  ihc  Xitagraph  Co.  of  .\merica,  of 
Xfw  York  City  (hLrciiiaftcr  referred  to  as  "Licensed  Manuficturers 
or  Importers"),  to  manufacture  or  imiiorl  motion  [)iclures  under 
the  said  reissued  letters  patent  and  to  lease  lieeii>ed  nuitiun  pictures 
(hereinafter  referred  to  a>  "licensed  motion  i)ictures")  for  use  on 
jirojccting  machines  licensed  by  ihe  Licensor;  and 

Whereas  the  undersigned  (hereinafter  referred  to  as  the  "Li- 
censee") desires  to  obtain  a  licence  under  said  reissued  Letters 
Patent  Xo.  I2i()2,  io  lea^e  from  the  Licensed  ^Llnufactur"rs  and 
Importers  licensed  motion  pictures  and  to  sublet  the  said  licensed 
motion  pictures  for  use  on  projecting  machines  licensed  by  the 
Licensor; 

Now,  therefore,  the  parties  hereto,  in  consideration  of  the  cove- 
nants herein,  have  agreed  as  follows: 

(i)  The  Licen.^or  hereby  grants  to  the  Licensee,  for  the  term 
and  subject  to  the  conditi(ms  expressed  in  the  "Conditions  of 
license"  hereinafter  set  forth,  the  license,  under  the  said  rei-sued 
Letters  Patent  No.  1:102,  to  lease  licensed  motion  pictures  from 
the  Licensed  Manufacturers  and  Importers  and  to  sublease  said 
licensed  motion  pictures  for  use  only  on  projecting  machines  licensed 
by  the  Licensor  under  letters  patent  owned  by  it. 

(2)  The  Licen>ee  covenants  and  agrees  to  conform  with  and 
strictly  adhere  to  and  be  bound  by  all  of  the  "  Conditions  of  license  " 
hereinafter  set  forth,  and  to  and  by  any  and  all  future  changes  in  or 
additions  thereto,  and  further  agrees  not  to  do  or  sutler  any  of 
the  acts  or  things  thereby  prohibited,  ard  that  the  Licensor  may 
place  and  publish  the  Licensee's  name  in  its  removal  or  suspended 
list  in  the  event  of  the  termination  of  this  agreement  by  the  Li- 
censor, or  in  case  of  any  violation  thereof,  and  may  direct  the 
Licensed  Manufacturers  and  Importers  not  to  lease  licensed  motion 
pictures  to  the  Licensee,  the  Licen>ee  hereby  expre-sly  agreeing 
that  such  Licensed  Manufacturers  and  Importers  shall  have  the 
right  to  cease  such  leasing  when  so  directed  by  the  Licensor:  and 
the  Licensee  further  agrees  that  the  signing  of  this  agreement  con- 
sdtutes  a  cancellation  of  any  or  all  agreements  for  the  sale  ni 
licensed  motion  pictures  made  prior  to  this  agreement  by  and  be- 
tween the  Licensee  and  any  or  all  licensed  manufacturers  or  im- 
porters, except  as  to  any  clause  in  said  agreements  relating  to  the 
return  of  motion-i)icture  lilm  to  the  several  licensed  manufacturers 
or  importers.  It  is  further  under'-tood  and  agreed  by  the  Licen.-.ee 
that   the  license  herebv  granted  is  a  personal  one  and  not  trans- 


I'ii;:    rAlKM    MuNUl'ULY 


261 


krrable  or  assignable,  and  the  Licensee  hereby  recognizes  and  ac- 
knowledges the  validity  <jf  the  said  rei^uied  Letters  Patent  No. 
12192. 

COXDITIONS    OK    LKKNSE. 

1.  From  the  date  of  thi^  agreement  the  Licensee  -hall  not  buy, 
ka-e,  rent,  or  otherwise  obtain  any  motion  pictures  other  than 
lieiii-ed  motion  pictures  and  shall  (li^pose  of  any  motion  pictures 
<iiily  by  the  subleasing  thereof  under  the  conditions  hereinafter 
-ct  forth. 

2.  I'he  ownership  of  each  licensed  motion  jncture  leased  under 
lhi>  agreement  shall  remain  in  the  Licensed  Manufacturer  or  Im- 
jiorler  from  whom  it  may  have  been  leased,  the  Licensee,  by  the 
pavment  of  the  leasing  price  acfjuiring  only  the  license  to  sublet 
-tall  motion  picture  subject  to  the  conditions  of  this  agreement. 
Siuh  license  for  any  motion  picture  shall  terminate  upon  the 
lirtai h  of  this  agreement  in  regard  thereto,  and  the  Licensed  Manu- 
i.iiturer  or  Im[M)rter  from  whom  it  may  have  been  leased  shall 
li,i\e  the  right  to  immediate  possession  of  such  motion  picture, 
without  liability  for  any  leasing  price  or  other  sum,  which  the 
Licensee,  or  the  person  in  whose  possession  said  motion  picture 
i-  found,  may  have  paid  therefor. 

.;.  The  Licensee  shall  not  sell  nor  exhibit  licensed  motion  pictures 
(il)lained  from  any  Licensed  ^Linufacturer  or  Imix)rter,  either  in 
tl'.f  United  States  or  elsewhere,  but  shall  (jnly  sublet  such  licensed 
niiitioM  pictures  }and  only  for  use  in  the  United  States  and  its 
iirritories]'  and  only  to  exhibitors  who  shall  exclusively  exhibit 
linii>Ld  motion  ])ictures,  but  in  no  case  shall  the  exhibitor  be  per- 
niiited  to  sell  or  s\iblet  or  otherwise  dispose  of  said  licensed  motion 
!)i(.tures. 

4.  The  leasing  price  to  be  i)aid  by  the  Licensee  to  the  Licensed 
M.niufacturers  or  Importers,  or  the  terms  of  i)ayment  for  or  ship- 
nunt  of  licensed  motion  pictures,  shall  in  no  case  be  less  or  more 
l,i\urable  to  the  Licensee  than  that  defined  in  the  lea-ing  schedule 
embodied  in  this  agreement  or  any  other  substitute  leasing  schedule 
wliiih  ma.y  be  regularly  adopted  by  the  Licensor  and  of  which 
In  it  ice  shall  l)e  given  to  the  Licensee  hereafter. 

s.  To  pi'rmit  the  Licensee  to  take  advantage  of  any  standing 
iiriicr  leasing  price  mentioned  in  such  schedule,  such  standing  order 

'  W'.rds  in  brackets  elimin:ite(l  by  PaUnts  Co.  by  notice  dated  Sept  13,  191 1, 
etTcctive  Oct.  1,  igii. 


MICROCOPY    RESOLUTION    TEST    CHART 


^iU    liO    Ttil    LHARi    Nu     i 


1.0 


I.I 


1.25 


1^ 

llliffi 

1" 

112.2 

1.4 


2.0 


1.8 


!.6 


^     APPLIED  IISA^GE     Inc 


262 


Industrial  CuMiiiNATioNS  and  Tri'sts 


with  any  Licensed  Manufacturer  ■  Importer  shall  he  for  one  or 
more  prints  of  each  and  every  subject  regularly  produced  and 
ofTered  for  lease  by  such  manufacturer  or  importer  as  a  standing 
order  subject  and  not  advertised  as  special  by  such  Licensed 
Manufacturer  or  Importer,  and  shall  rem.ain  in  force  for  not  less 
than  14  consecutive  days.  Any  standing  older  may  be  canceled 
or  reduced  by  the  Licensee  on  14  days'  nuiice.  Extra  j^rints  in 
addition  to  a  standing  order  shall  be  furnished  to  the  Licensee  at 
the  standing  order  leasing  price. 

6.  The  Licensee  shall  not  sell,  rent,  or  otherwise  dispose  of, 
either  directly  or  indirectly,  any  licensed  motion  pictures,  however 
the  same  shall  have  Luen  obtained,  to  any  persons,  firms,  or  corpora- 
tions or  agents  tii  'reof  who  may  be  engaged  cither  directly  or  in- 
directly in  selling  or  renting  motion-picture  I'llms. 

7.  The  Licensee  shall  not  make  or  cause  to  be  made  or  permit 
others  to  make  reproductions  or  so-called  "dupes"  of  any  licensed 
motion  pictures,  nor  sell,  rent,  loan,  or  otherwise  dispose  of  or 
deal  in  any  reproductions  or  "dupes"  of  any  motion  pictures. 

8.  The  Licensee  shall  not  deliberately  remove  the  trade-mark  or 
trade  name  or  title  from  any  licensed  motion  picture,  nor  permit 
others  to  do  so,  but  in  case  any  title  is  made  by  the  Licensee,  the 
Manufacturer's  name  is  to  be  placed  thereon,  jirovided  that  in 
making  any  title  by  the  Licensee  the  Manufacturer's  trade-mark 
shall  not  be  reproduced. 

g.  The  Licensee  shall  return  to  each  Licensed  Manufacturer  or 
Importer  (without  receiving  any  payment  therefor,  excepl  that  the 
said  Licensed  Manufacturer  or  Imjiorter  shall  pay  tlu'  traii-porta- 
tion  charges  incident  to  the  ri'turn  of  the  same)  on  llic  1st  day  of 
every  month  commencing  seven  months  from  the  1st  day  of  the 
month  on  which  this  agreement  is  executed  an  eijuivalenl  amount  of 
positive  motion-picture  film  in  running  feet  (not  purchased  c  r  leascil 
over  12  months  before)  and  of  the  make  of  the  said  Licensed  Manu- 
facturer or  Importer  e'lual  to  the  amount  of  licen>ed  motion  j)ic- 
tures  that  was  so  leased  during  the  seventh  month  prufding  the 
day  of  each  such  return,  with  the  exception,  howiAcr,  that  where 
any  such  motion  piitures  are  destroyed  or  l<wt  in  tr.tn-portatioii 
or  otherwise  and  satisfactory  jiroof  is  furnished,  witliin  14  days 
after  such  destruction  or  loss,  to  the  Licensed  Manufaitunr  or  Im- 
porter fr<im  whom  such  motion  picture  was  leased  tin-  l.itcn-nl 
M.inufacfurer  or  Inijiorter  shall  liiduit  the  amount  so  destroyed  or 
lost  from  the  amount  to  be  returned. 


i^^T^ 


The  Patent  Monopoly 


^63 


10.  The  Licensee  shall  not  sell,  rent,  sublet,  loan,  or  otherwise 
dispose  of  any  licensed  motion  pictures,  however  the  same  may 
have  been  obtained,  to  any  person,  firm,  or  coqwration  in  the 
exhibition  business  who  may  have  violated  any  of  the  terms  or 
cnnditions  imposed  by  the  Licensor  through  any  of  its  licensees 
and  of  uliich  violation  the  [iresent  Licensee  may  have  had  notice. 

11.  The  Licensee  shall  not  sublease  licensed  motion  pictures  to 
any  exhibitor  unless  a  contract  with  said  exhibitor  (satisfactory  in 
form  to  the  Licensor)  is  tlrst  exacted,  under  which  the  exhibitor 
agrees  to  conform  to  all  the  conditions  and  sti[)ulation:i  of  the  pres- 
ent agreement  applicable  to  the  exhibitor;  and  in  the  case  of  an  ex- 
hibitor who  may  operate  more  than  a  single  {)lace  of  e  hibition,  a 
similar  contract  shall  be  exacted  in  connection  with  eacn  place  so 
u[)erated,  and  supplied  with  licensed  motion  pictures  by  the  Li- 
censee. 

12.  After  February  i.  1909,  the  Licensee  shall  not  sublease  any 
licensed  moliun  pictures  to  any  exhibitor  unless  each  motion- 
picture  projecting  machine  on  which  the  licensed  motion  pictures 
are  to  be  used  by  such  exhibitor  is  regularly  licensed  by  the  Motion 
Picture  Patents  Co.,  and  the  license  fees  therefor  have  been  paid; 
and  the  Licensee  shall,  before  supplying  such  exhibitor  with  licensed 
motion  pictures,  mail  to  the  Motion  Picture  Patents  Co.,  at  its 
ofTice  in  New  York  City,  a  notice,  giving  the  name  of  the  exhibitor, 
the  name  and  location  of  the  place  of  exhibition  (and,  if  requested 
to  do  ^o  by  the  Licensor,  its  seating  capacity,  hours  of  exhibition 
and  jiriee  of  admission,  and  the  number  and  make  of  the  licensed 
projecting  machine  or  machines),  together  with  the  date  of  the 
cdnuiiciuenient  of  the  subleasing,  all  in  a  form  approved  by  the 
Licensor.  The  Licensee,  when  properly  notit'ied  by  the  Licensor 
that  the  license  fees  of  any  exhibitor  for  any  projecting  machine 
have  not  b'  en  jiaid,  and  that  the  license  for  such  projecting  machine 
is  terminated,  shall  immediately  cease  to  supply  such  exhibitor 
with  licensed  motion  pictures. 

13.  The  Licensee  agrees  to  order  during  each  month  while  this 
agreement  is  in  force,  for  shipment  directly  to  the  place  of  business 
ot  the  Licensee  in  the  city  for  which  this  agreement  is  signed, 
liiensed  moti(.n  jjictures,  the  net  leasing  prices  for  which  shall 
amount  to, it  least  S-'.Soo. 

14.  rile  Lic'-nsee  shall,  on  each  Monday  during  the  continuance 
of  this  agrcetiient,  make  or  mail  j'.iyment  to  e.u  h  Licensee!  ^Llnu- 
facturer  and  Importer  for  all  invoices  for  licensed  motion  pictures 


m 


-i 

-    4 

~ 

i 
.  ^ 

J 

264 


Industrial  Coiibinatioxs  and  Trusts 


which  have  been  received  by  the  Licensee  during  the  precedinj^ 
week. 

15.  This  agreement  shall  extend  only  to  the  place  of  business  for 
the  subleasing;  of  motion  pictures  maintiined  by  the  Licensee  in 
the  city  for  which  this  a^freement  is  si,u;ncd,  and  the  Licensee  agrees 
not  to  establish  or  maintain  a  place  of  business  for  the  subleasing 
of  motion  pictures,  or  from  which  motion  pictures  are  delivered  to 
exhibitors,  in  any  other  city,  unless  an  agreement  for  such  other 
city,  similar  to  the  present  agreement,  is  first  entered  mto  by  and 
between  the  Licensee  and  the  Licensor. 

16.  This  Licensor  agrees  that  before  licensing  any  i)er-;on,  firm, 
or  corporation  in  the  b'nited  States  (not  including  it.-  in>ular  terri- 
torial pusse>sions  um]  .\laska)  to  lease  licensed  motion  pictures 
from  Licensed  Manuf  ;turers  and  importers  and  to  suljlea.se  such 
motion  pictures,  it  will  exact  from  each  such  licensee  an  agreement 
.similar  in  terms  to  the  present  agreement,  in  order  that  all  licensees 
who  may  do  business  with  the  Licenced  Manufacturers  and  Im- 
porters will  be  placed  in  a  position  of  exact  equality. 

IQ.'  It  is  understood  and  s])ecifically  covenanted  by  the  Licensee 
that  the  Licensor  may  terminate  this  agreement  on  14  day^'  written 
notice  to  the  Licensee  (if  its  intention  so  to  do,  and  that  if  the 
Licensee  shall  fail  to  faithfully  keip  and  j)erf'irni  the  foregoing 
terms  and  conditions  of  lease,  or  any  of  them,  or  shall  fail  to  pay 
the  leasing  price  for  any  motion  pictures  supplied  by  any  Licen^ed 
^Lmufacturer  or  lrni)orter  when  due  and  pa\'able  according  to 
the  terms  of  this  agreement,  the  Licensor  shall  have  the  right  to 
place  the  Licensee's  name  on  an  appr(>;)riate  suspended  list,  whi  h 
the  Licensor  may  j)ubli--h  and  distribute  U)  its  other  licen.seis  and  to 
exhibitors  and  to  the  Licensed  .\Linufacturers  and  Importers  and 
to  direct  the  Licensed  .\LiriUl;u  tun ts  anil  Inii>orters  not  to  lease 
licen.se  motion  picture>  to  the  Licensee,  and  the  exercise  of  either 
or  both  of  these  rights  by  the  Licensor  >hall  not  be  construed  as  a 
termination  of  this  license,  and  the  Licensor  shall  also  have  the 
right  in  such  case,  upon  appro[)riate  notice  to  the  Licen'ee,  to 
immediately  terminate  the  present  license,  if  the  Licensor  shall  so 
elect,  without  prejudice  to  the  Licensor's  right  to  sue  for  and 
recover  any  ilam.mes  which  may  have  l)een  suffered  by  sue  h  breach 
or  nonconipliaiu  (■  with  tin-  ternis  and  conditions  hereof  by  the 
Licensee,  sui  h  breath  or  iioticonijiliance  constituting  .'.n  infringe- 
ment of  said  reissued  letters  patent.  It  ir,  further  agreed  by  the 
'  Thus  iu  originaf  —  LU. 


T'BH 


The  Patent  Monopoly  265 

Licensee  that  if  this;  agreement  is  terminated  by  the  Licensor  for 
any  breach  of  any  condition  hereof,  the  right  to  possession  of  all 
licensed  motion  j)ictures  shall  revert,  jo  days  after  notice  of  such 
termination,  to  the  respective  Licensed  Manufacturers  and  Im- 
jwrters  from  whom  they  were  obtained  and  shall  be  returned  to 
such  Licensed  Manufacturers  or  Importers  at  once  after  the  expira- 
tion of  that  period. 

20.  It  is  understood  that  the  terms  and  conditions  of  thi-  license 
may  be  changed  at  the  option  of  the  Licensor  upon  14  day-'  written 
notice  to  the  Licensee;  but  no  --uch  change  shall  be  effecti\e  and 
binding  unless  duly  ralilied  by  an  otTicer  of  the  Licensor. 
Leasing  prices  {per  running  J  out)  0/  Heensed  positive  niolion  pietures. 

Cents, 
l.i.l J  J 

Standing  order 1^ 

Films  leased  between  2  and  4  months  after  release  date 9 

films  leased  between  4  and  0  months  after  release  date 7 

I'ilms  leased  o\ er  (>  month.-  after  release  date 5 

A  ret)ate  of  10  [icr  cent  will  be  allowed  on  all  leases  of  licensed 
motion  pictures,  except  at  the  7-cent  and  5-ccnt  prices,  which  are 
net;  said  rebates  to  be  due  and  payable  between  the  i.^t  and  15th 
days  of  each  of  tlie  months  if  .March.,  Ma_\.  July,  September, 
November,  and  January  on  all  films  leased  during  the  two  months 
preceding  each  >aid  period,  provided  all  the  terms  and  conditions 
'•l'  thi.--  licen-e  agreement  ha\e  been  faithfullv  observed. 


■':\\ 


I  IK  MS. 

All  -hii)ments  ,ire  made  i.  o.  b.  le^sorV  otTice  at  le^.-ee's  risk. 
Ml  moti(.n-j)icture  lilm    ;ire  to  be  >hi])i)ed  to  le»ee's  otlice  only. 
The  lengths  at  which  motion-picture  tilms  are  listed  and  leaded 
are  only  approximate. 

Motion  PirTiKi:  P\rrNTs  Co., 
liv   1).   NL\cl)()N.\i.i).  Cieneral  Manager. 

(Licensee's  signature.) , 

Greatkr  New  York  Far  Rpntai.  Co., 

,  Secretary. 

Place  of  business  for  whii  h  thi^  licen-e  i-  granted,  \o.  24  Union 
.S(|uare,  New  York,  X.  Y. 
January  20,  1909. 


266 


Industrial  Combinations  and  Trusts 


Exhibit  3 


CRCIWN    CORK    AND    SKAL    COMPANY 

Fnrni  of  licftisi'  and  Irasf  of  automatic  power  Crown  soda  machine 
from  the  Crown  Cork  c^  Seal  Co.,  of  Baltimore  city,  lessor, 

to . 

The  Crown  Cork  &  Seal  Co.,  of  Baltimore  city,  hereby  licenses 

and  leases  to ,  lessee,  one  automatic  power  Crown 

soda  machine  under  United  States  Letters  Patent  Xos.  47377(>. 
April  26,  i8q2;  608158,  July  26,  1895;  6oq20q,  August  16,  1898; 
658^54,  December  5,  1800;  and  also  patent  applications  tiled  in 
the  United  States  Patent  Office,  to  be  used  only  by  said  lessee 


The  lessee  agrees  to  pay  therefor  Si. 200.  f.  o.  b.  Baltimore,  30 
days  after  date  of  shipmeiit  of  invoice,  SA  per  month  for  the  whole 
term  of  the  lease,  the  first  payment  to  be  made  on  the  last  day  of  the 
month  succeedin,!^  shipment,  and  on  the  last  day  of  each  succeeding 
month  thereafter. 

The  lease  and  license  are  p;ranted  for  the  full  term  for  which 
said  patent  was  originally  granted,  to  wit,  for  17  years  from  date, 
and  shall  continue  during  that  term,  without  reference  to  any  de- 
cision as  to  the  validity  of  any  said  patents. 

The  license  and  lease' arc  granted  upon  the  following  conditions: 
The  said  machine  .-^hall  be  used  only  in  conn<-ction  with  crown 
corks  purcha.-ed  by  tlu'  lessee  directly  from  lessor;  crowns  not  fit 
for  service  may  be  returned  at  the  Crtnvn  Cork  &  Seal  Co.'s  ex- 
pense before  use  and  within  \o  day--  from  date  of  invoice.  The 
lessor  shall  be  soK'  judge  of  the  origin  or  manufacture  of  crowns 
returned;  the  lessor  >hail  not  be  liable  for  any  con>e(|uential  dam- 
ages or  for  any  abatement  in  the  rent  or  any  loss  oth(  r  than  such 
return  of  crowns  on  account  of  alleged  defects  in  crowns.  The  ma- 
chine shall  be  kept  in  repair  by  the  lessee  at  its  own  expense,  but 
the  repair  parts  shall  be  purchased  from  the  lessor  at  its  regukir 
catalogue  prices. 

The  Crown  Cork  X:  Seal  Co.  shall  at  all  tiines  have  access  to  the 

'  Hi'iirings  ht-foro  the  CntTimitfcc  on  ihi-  Judiuury  <in  Trust  and  Piitcnl 
Lcgi^fition,  House  Rc|)ons— Nos.  ii.^8o-i  i  vSi,  tsgifi,  iqqS')-  <^'^^  Congress, 
:nd  Session.  ioit-i()i2.  Trust  Lcgisl.ilion  Serial  No.  i,  I'dluut  LcgisUlion 
Serial  No.  i,p.  1O4. 


The  Patent  Monopoly 


207 


inarliine  and  under  such  conditions,  however,  as  shall  not  interfere 
with   its  operation. 

This  lease  and  license  shall  not  be  subject  to  either  voluntary 
nr  involuntary  assignment,  but  upon  surrender  of  the  license  and 
the  payment  of  all  arrears  thereunder,  the  Crown  Cork  &  Seal  Co. 
of  Pjaltimore  City  will  issue  to  such  person  as  the  lessee  may  des- 
ignate a  new  license,  reserving  only  the  rentals  thereafter  maturing 
.iiid  otherwise  identical  with  ti'is  license. 

If  said  lessee  shall  violate  or  fail  to  perform  any  of  the  terms  or 
I  unditions  of  this  instrument,  then  this  lease  or  license  shall,  at  the 
option  of  the  lessor,  be  null  and  void,  and  said  Crown  Cork  &  Seal 
Co.  of  Baltimore  City  shall  have  the  right  at  any  time  to  take 
possession  of  the  machine. 

This  license  shall  not  be  valid  unless  confirmed  by  countersigna- 
ture of  the  Crown  Cork  &  Seal  Co.  at  its  home  office  in  Baltimore. 

Witness  the  signatures  of  said  parties  this  day  of , 

igo — . 

LICENSE   TO   OPERATE. 

Crown  cork  system  and  automatic  crown  machine. 

March  i.^,  1910. 
To  the  Crown  Seal  &  Cork  Co.,  Baltimore: 

We  hereby  make  ap[)lication  for  license  to  operate  your  crown 
1  nrk  >y>tnii  and  automatic  crown  machine,  as  coviTi'd  by  [lalents, 
\'n.  o,v^.vi4.  dated  December  5,  iSqo,  and  .\o.  0^  :,q~  •^.  dated  Feb- 
ruary 20,  i()00,  to  be  used  in  Boston.  Mass.,  and  recjuest  you  to 
forward  to  our  address  one  automatic  crown  machine,  at  Si,Soo, 
f    o.    b.,    lialtimore. 

rpon  ilie  granting  of  the  license  we  agree  and  oblig.itc  (Uirselvcs 
that  the  sy>tem  and  machine  shall  only  be  M-ed  and  operated  b\' 
u^  in  connection  with  crown  corks,  pure  hased  from  the  Cruwn  Cork 
\-  Seal  Co.,  and  bottles  made,  by  properly  authori/td  maimfac- 
turers,  v. itli  tlu-  ((iin])any's  standard  finishing  tooN. 

It  is  agreed  that  the  price  of  crown  corks  (plain)  -hall  not  cx- 
ned  25  cents  per  gross,  f.  o.  b.,  Baltimore.      It  is  agreed  that  the 

shall  have  the  btnetit  of  any  general  reduction  in 

'he  price  of  crown  corks. 

It  is  further  agreed  that  no  iTiims  for  consecjuential  damages 
^liall  be  allowed  by  the  Crown  Cork  &  Seal  Co. 


1^ 


ti'l 


.Jikl 


268 


TxniSTKIAl.    ("oMBIXATIOXS   AND    TlU'STS 


ACRKHMKNT  dl'    I.ICi.XSr,   AXD   I.i.ASi:   dl    ONK  CRcnVX    MAriUXE. 

Tlu'  Crown  Cork  t\:  Sral  Co.,  of  Haltimore  City,  calk'tl  the-  Crown 
Co.,  hercliy  licenses  and  leases  to 


-,  doinR  business  at 


Boston,  Mass.,  called  the  lessee,  one  Crown  machine  of  the  stand- 
ard type  Ix'low  nitntioned,  and  does  hereby  license  said  lessee  to 
use  for  the  term  and  witliin  the  leriri>  and  limitations  herein  set 
forth,  the  Crown  Co.'s  cork  system,  i.  e.,  the  said  machini',  and 
processes.  Tliis  license  is  granted  under  the  following  United 
States  patents,  to  wit:  Xo.  47;;77(),  .April  20,  i8c)2;  \o.  60S15S, 
July  ^6,  i8qS;  Xo.  638,^54,  December  5,  iSqg;  Xo.  ()43Q7,3,  I'eb- 
ruary  20,  njoo;  Xo.  77()09i,  January  10,  11)05;  '^'*^'  9o8()88,  Jan- 
uary 5,  Kjoo,  and  other  letters  patent  heretofore  or  hereafter 
granted  to  the  Crown  Co. 

Type  of  macliinc. — The  type  of  machine  ^o  leased,  and  annual 
rental  payable  therefor,  is  the  following  (i.  e..  the  one  not  canceiedi: 

Machine  type,  automatic  power  Crown  beer  machine (rcntl, 

Si  So. 

I'lrm  oj  lease. — The  term  of  this  atrrei'iiient  commences  on  the 
date  hereof  and  ciinii,iuc.>  until  terminated  as  herein  provideil. 
Either  the  Crown  Co.  or  lessee  may  at  their  option,  respectively, 
terminate  this  agreement. 

Rent. — The  lessee  shall  pay  to  the  Crown  Co.  the  annual  rent 
above  stated  for  the  type  of  machine  leased;  the  rent  shall  be  paya- 
ble in  eijual  quarterly  instalments  on  the  I^-t  days  of  Jaiutary, 
.Xjiril.  July,  and  October;  the  first  instalment  shall  commence  on 
tht'  lirst  day  of  the  month  succeeiling  the  shipment  of  the  machine, 
and  shall  be  a  ikie  proportion  for  the  lime  from  such  date  to  the 
tirst  (|uarterly-p.iyment  date. 

Termination. — This  lease  and  license  may  be  terminated  bv 
either  party  at  their  options,  res|)ectively,  and  shall  terminate  on 
the  date  tixed  therefor  as  herein  provided.  The  Crown  Co.  mav 
terminate  the  -ame  by  written  notice  addressed  to  tlu'  lessee  at 
his  address  herein  given,  mailed  at  Hadtimore,  atid  -hall  take  elTect 
()0  days  after  the  mailing  date.  The  lessee  may  terminate  liv  sim- 
ihir  written  notice  addressed  to  the  Cmwn  Co.  at  i5altimore,  to- 
gether with  the  delivery  of  the  machine,  f.  o.  b.  H.dtimore,  to  the 
Crown  Co.,  anil  ti  rmination  by  the  lessee  shall  take  eftect  on  such 
delivery,  and  shall  not  take  effect  unless  or  until  such  delivery  is 
made.  Xo  abatement  of  rent  shall  be  made  while  the  machine  is 
in  the  lessee's  possession  <>r  until  such  delivery  at  Bal'iniore.    On 


The  Patkm   Moncjpoly 


26q 


any  termination,  ail  lialjilities  of  tlic  lessee  to  tlie  Crown  Co.,  includ- 


ing a 


rrears  of  rent,  and  a  due  i)roportion  of  the 


irter 


accruins^ 
rent  to  the  date  it  tai^es  etTect.  shall  be  at  once  due  and  [laxahle. 

And  the  said  parties  herein-  aj:ree  as  follows:  The  lessee  shall  not 
\)v  obligi'd  to  insure  the  machine  or  be  liable  for  its  value  destroyed 
1)\  lire  or  lost  in  transportation.  All  deli\eries  of  the  machine' by 
or  to  the  Crown  Co.  shall  be  f.  o.  b.  BalliiiKjre,  and  the  les-ce  shall 
pay  ail  transportation  charires  and  all  taxes  on  the  machine.  'i"he 
said  machine  shall  !je  u>ed  only  by  -aid  k— tx-  at  hi>  [>lace  of  busi- 
ness in  the  city  above  stated,  l  .lv  le»ee  ^'lail  keep  the  machine 
in  good  workinj^  order  and  condition  at  his  own  exi)ense  and  pay 
the  cost  of  repair  of  any  machine  not  in  such  condition  when  re- 
turned to  the  Crijwn  Co.,  whether  the  lease  ]>c  terminated  by  either 
party.  Repair  parts  must  be  obtained  from  the  Crown  Co.  only. 
The  Crown  Co.  shall  in  no  event  be  liable  for  any  conseriuential 
damages  or  injury  to  business  claimed  to  arise  from'  alle.L^ed  defects 
in  leased  machines  or  for  defects  in  quality  of  or  failure  to  deliver 
crowns;  nor  shall   the  payment  of  the  rent  be  affected  thereby. 

This  license  and  lease  shall  not  be  subject  to  voluntary  or  involun- 
tary alii  nation,  but  upon  surrender  hereof  and  the  payment  of  all 
arrears  hereunder  and  all  of  the  lessee's  liability  to  the' Crown  Co., 
the  Crown  Co.  will  issue  to  the  lessee's  nominee  a  new  lease  and 
license,  reserving,'  only  the  rentals  thereafter  maturing  and  other- 
wise identical  with  this  in>trument. 

This  instrument  is  not  \alid  unless  signed  or  conl'irmed  by  the 
Crown  Co.  at  its  home  ofiice.  Baltimore,  Md. 

Dated  ist  day  of  June,  191 1. 


The  Crown  Cork  &  Seal  Co. 


Secretarv. 


■.XIIIBIT   4 


siDxr.v  iii;\'n  v.   \.  n,  nicK  compaxv 


I 


Mr.  Justice  Lurton  delivered  llie  opinion  of  the  court: 
This  cau.se  comes  to  this  court  upon  a  certificate  uiiikr  the  sixth 
section  of  the  court  of  ajipeals  act  of  March  ^i,  i.S^i. 

'  Will  appear  in  2230^24  U.S.  The  fact  tliai  ihcc.  -rpts  in  this  exhibit  are 
taken  from  an  ad\  am  r  c-opy  nf  the  dci  ix'o  will  anouni  for  su'  li  slit;ht  dilTcrcnLes 
in  ("jnctuation  and  tiu'  um'  oi  italics  as  may  be  observed. — l',d. 


270 


I::i)usTRiAL  Combinations  and  Trusts 


The  facts  and  the  questions  certified,  omitting  the  terms  of  the 
injundion  awarded  Ijy  the  circuit  court,  are  these: 

This  action  \va.>  l)n!U,t;hl  hy  ihc  cnm[)lainant,  an  Illinois  corporation,  for  the 
infrinKcnienl  of  two  letters  patent,  ox-ned  by  the  complainant,  cDvering  a  slencil- 
duplii  aling  machine  known  as  the  rotary  mimeot;ra')h.  The  dt  fen(la^ts  are 
(loinj;  hu>iness  as  cojiartners  in  the  city  of  New  York.  The  complainants  soM 
to  one  Christina  15.  Skou,  of  New  ^'ork.  a  rotary  mimeoj;ra[)h  cmbodyint;  the 
invention  dcsciihed  and  claimed  in  said  patents  under  license  which  was  attached 
to  said  machine,  as  follows: 

"  LICENSE    RESTRICTION. 

"This  machine  is  sold  by  the  .\.  B.  Dick  Co.  with  the  lirensc  restriction  that 
it  may  be  used  only  with  the  stencil  paper,  ink.  and  other  supplies  made  by  .\.  H. 
Dick  Co..  Chicago,  United  States  of  .\meric.i. 

"The  defendant.  Sidney  Henry,  sold  to  .Miss  Skou  a  can  of  ink  suitable  for 
u.sc  upon  said  mimeograph  with  knowled;;e  of  the  said  license  aKrecmenl  and 
with  the  expectation  that  it  would  be  used  in  connection  with  said  mimeograph. 
The  ink  sold  to  Miss  Skou  was  not  covered  l)v  the  claims  of  said  patent. " 

f.)l,"ESTIO.\    CEKTIKIKD. 

Upon  the  farts  above  set  for»h.  the  question  concerninf;  which  this  <  ourt  de- 
sires the  instruction  of  the  Supreme  (,"ourt  is: 

Did  the  acts  of  the  defendants  constitute  contributory  infringement  of  the 
complainant's  pateats? 

There  could  have  been  no  contributory  infringement  by  the  de- 
fendants, unless  the  u.-e  of  Miss  Skou's  machine  with  inl<  not  made 
l)y  the  complainants  would  have  been  a  direct  infringement.  It 
is  not  denied  that  she  accepted  the  machine  with  notice  of  the  con- 
ditions under  whidi  the  patentee  consented  to  its  use.  Xor  is  it 
denied  that  therel)y  she  agreed  not  to  use  the  machine  otherwise. 
What  defendants  say  is  that  this  agreemcat  was  collateral,  and 
that  its  validity  depended  upon  princijiles  of  general  law,  and  that 
it  \alid  the  only  remedy  is  such  as  is  afforded  by  general  j)rinciples 
of  law.  Therefore  they  .say  that  the  suit  is  not  one  arising  under 
the  patent  law,  and  one  not  cognizable  in  a  Federal  court  unless 
diversity  of  citizenship  exists. 


We  are  unable  tc  assent  to  the.se  suggestions.  We  do  not  pre- 
scribe the  jurisdiction  of  courts,  Federal  or  State,  but  only  give 
ciTect  to  it  as  fixed  l)y  law.  Tf  a  bill  asserts  a  ricjht  under  the  patent 
law  to  sell  a  i)atented  machine  '^uliject  to  restrictions  as  to  its  use. 
and  .illeges  a  use  in  \iolalion  i,)f  the  restrictions  as  an  infringement 


The  Patent  Moxdpoi.Y 


^71 


of  the  patent,  it  presents  a  question  of  the  extent  of  the  [)atcntce's 
prl\ilege,  whieh,  if  determined  one  way,  brings  the  [irohibited  u>e 
witliin  the  provisions  of  the  patent  law,  or.  if  determined  the  other 
way,  brings  int(j  o[)eration  only  [)rinciples  of  general  law.  Ob- 
viously a  suit  for  infringement,  which  must  turn  upon  the  scope 
of  the  monopoly  or  pri\ilege  secured  to  a  patentee,  presents  a  case 
arising  under  the  patent  law.  The  jurisdiction  of  thr  circuit  court 
(jver  such  cases  has,  for  more  than  a  century,  been  exclusive  by  the 
express  terms  of  the  statute,  although  for  the  nio.-t  part  it.-  jurisdic- 
tion over  other  kinds  of  suits  arising  under  the  Constitution  and 
laws  of  the  United  States  is  only  concurrent  with  that  of  the  State 
courts. 


That  the  license  agreement  constitutes  a  contract  not  to  use 
the  machine  in  a  prohibited  manner  is  plain.  That  defendants 
might  be  sued  u[)on  the  broken  contract,  or  for  its  enforcement  or 
for  the  forfeiture  of  the  license,  is  likewise  plain.  But  if  by  the  use 
of  the  machine  in  a  prc^hibited  way  Miss  Skou  infringed  the  jiatent, 
then  she  is  also  liable  to  an  action  under  the  patent  law  for  infringe- 
ment. Now,  that  is  primarily  what  the  hill  alleged,  and  this  suit 
is  one  iirought  to  restrain  the  defendants  as  aiders  and  abettors  to 
her  proposed  infringing  use. 


The  books  abound  in  cases  upholding  the  right  of  a  patentee 
owner  of  a  machine  to  license  another  to  use  it  subject  to  anv 
(lualiucaticm  in  respect  of  time,  place,  manner,  or  purpo.se  of  use 
which  the  licensee  agrees  to  accej)!.  .Any  use  in  excess  of  the 
licence  would  obviously  be  an  infringing  use  and  the  license  would 
he  no  defense.  (Robinson  on  Patents,  sees.  915,  ()iO,  and  notes.) 
Th<'s  is  so  elementary  we  shall  not  stop  to  cite  cases. 

Tlie  contention  is  not  that  a  patentee  may  not  permit  the  use  of  a 
patented  thing  with  such  qualihcations  as  he  sees  lit  to  imi)ose,  and 
th:it  a  i)rohibited  use  will  be  an  infringing  one,  but  that  he  can  only 
keej)  the  article  within  the  control  of  the  patent  by  retaining  the 
title.  To  put  the  contention  in  another  form  —it  is  that  any  transfer 
of  the  patentee's  property  right  in  a  patented  machine  carries  with 
!t  the  right  to  use  the  entire  invention  so  long  a^^  'he  identity  oi  the 
machine  is  jtreserved,  irrespective  of  any  restri  tions  placed' by  the 
patentee  upon  tiie  use  of  the  article  and  accepted  by  the  buyer. 


Fl 


i     'I 


272 


InUUSTKIAI.    (."o.MlllNATlUNS    ANU    TkUSTS 


It  is  said  that  by  such  a  sale  the  patontrc  '"(lisposis  of  all  his  rights 
under  his  naten't,  and  thereby  removes  the  arlirle  from  the  t)i)era- 
tion  of  the  patent  hw."  li  he  attempts  to  mU  the  machine 
for  specified  uses  only  and  prohibit  all  others,  the  restriction  is 
disposed  of  as  con>litutinj^  a  collateral  aj^^rcement,  such  as  any 
vendor  of  per^onal  jjroperty  might  impose,  and  enforceable,  it 
valid  at  all.  only  as  a  collateral  contract. 

The  issue  is  a  plain  one.  If  it  be  sound,  it  coiiclude>  the  ca^e,  and 
t)ur  response  should  be  a  negative  one,  since  the  violation  of  a  mere 
collateral  contract,  which  is  not  also  an  infringement  of  the  patent, 
would  not  be  a  case  arising  under  ihe  patent  law.  Hut  i~  it  true  that 
where  a  patentee  sells  his  patented  machine  for  a  specific  and 
limited  use,  he  does  not  thereby  reserve  to  himself,  as  a  patentej, 
the  exclusive  right  to  all  unpermitted  uses  which  may  be  made  of 
hi>  invention  as  emhod;^!  in  the  machine  sold?  Obviously,  this  is 
a  (jucstion  arising  under  the  patent  law.  By  a  sale  of  a  patented 
article  subject  to  no  conditions  the  purchaser  undeniably  acfjuires 
the  right  to  use  the  article  for  all  the  purposes  of  the  patent  so  long 
a-  il  endures,  lie  may  use  it  where,  when,  and  how  t.e  pleases, 
and  may  dispose  of  the  same  unlimited  right  to  another.  This  has 
long  been  the  settled  doctrine  of  thi:>  and  ail  patent  courts 


An  absolute  and  unconditional  sale  oinTales  to  ]xass  the  iiatented 
thing  ()Ut>ide  the  li.iuidario  of  the  patent,  because  such  a  sale 
implies  that  the  i)aUntee  consent-  that  the  purch;i-;er  may  use  the 
machine  so  long  as  its  identity  is  I'.reserxed.  i'his  implication 
arises,  I'lrst,  because  a  sale,  without  reservation,  ot  a  machine  who.'^e 
value  consists  in  its  use,  for  a  con>ideration,  carries  with  it  the 
presumption  that  the  right  to  use  the  jiarticuiar  machine  is  to 
jKiss  with  it.  The  rule  and  its  reason  i>  thu^  staled  in  Kobinson  on 
Patents  (sec.  8:41: 

Tlu-  >alc  niU't,  furtlu-rmore".  be  unconditional.  X'li  ,,iily  ni.iy  tin-  patentee 
impose  conditions  limilins  tiie  use  of  the  patented  article  upon  iii>  grantees 
and  express  licensees,  hut  any  person  having  the  right  to  sell  may  at  the  time 
of  sale  restrict  the  use  of  his  vendee  within  speeilic  boimdaries  of  time  or  place 
or  method,  and  these  will  then  become  the  measure  of  the  implied  license  ari.-i- 
inp  from  the  .sale. 

The  argument  for  the  defendants  ignores  the  di.-tinction  between 
the  property  right  in  the  materials  composing  a  patented  machine 
and  the  right  to  use  for  the  purpose  and  in  the  manner  pointed  out 


ff- 


Till:  Patf.m    .Mm.\(),>(,i.v 


^'73 


by  the  patent.  The  latter  may  be  and  often  is  tin-  Rreater  element 
of  value,  and  the  buyer  may  desire  it  only  to  aiiply  to  suine  <ir  all  of 
the  use?  included  in  t  e  invention.  Hut  the  two  th'  irs  are  separable 
rij^hts.  If  sold  unreservedly,  the  rij^ht  to  the  entire  use  of  the  inven- 
tion passes,  because  that  is  the  implied  intent;  but  this  right  to 
use  is  nothing  more  ncr  less  than  an  unrestricted  license  presumed 
from  an  uncondilicnial  .-ale.  A  licen-e  i>  not  an  assignment  of  any 
iiUerest  in  the  patent.  It  is  a  mere  iierniis>ion  granted  bv  the 
patentee.  It  may  be  a  license  to  make,  sell,  and  u>e,  or  it  mav  be 
limited  to  any  one  of  these  separable  rights.  If  it  be  a  license  to 
use,  it  operates  only  as  a  right  to  use  without  !« ing  liable  as  a  in- 
I  ringer.  If  a  licensee  be  sued,  he  can  escape  liability  to  the  patentee 
l.ir  the  use  of  his  invention  by  showing  that  the  use  is  within  his 
license.  But  if  his  use  be  oiie  prohibited  by  the  license,  the  latter 
i>  ol  no  a\ail  as  a  defense.  .\s  a  license  passes  no  interest  in  the 
monopoly,  it  has  been  described  as  a  mere  waiver  of  the  right  to 
sue  by  the  patentee.     (.Robinson  on  Patents,  sees.  806,  80S.) 


it . 

'4  .    !| 


It  is  plain  from  the  power  of  the  patentee  to  .subdivide  his  exclu- 
.-ive  ritrht  of  use  that  when  he  makes  and  sell>  a  patented  de\ice 
that  the  e.xtent  of  the  license  to  use  which  is  carried  by  the  sale 
must  depend  u])on  whether  any  restriction  was  ])laci'd  u[H)n  the 
u-c  and  iirought  home  to  the  person  accjuiring  the  article. 

That  here  the  patentee  did  not  intend  to  sell  the  machine  made 
Ijy  it  subject  to  an  unrestricted  use  is  of  course  undeniable  from 
the  words  upon  the  machine,  viz: 

LICi;XSF.    RESTRICTION". 

This  machine  is  iolil  hy  the  A.  H.  Dirk  Co.,  witli  the  license  rcstriciicm  thai  it 
may  be  used  only  with  the  stencil,  paper,  ink, ,.:.  i  uther  supphe>  nutde  in-  A.  B. 
Dick  Co. 


If,  then,  we  assume  that  the  violation  of  restrictions  upon  the 
use  of  a  machine  made  and  sold  by  the  patentee  may  be  treated  as 
inlringement,  we  come  to  the  question  of  the  kind  ui  limitation 
which  may  be  lawfully  imposed  upon  a  jjurchaser. 

To  begin  with,  the  purchaser  must  have  notice  that  he  buys  with 

■nly  a  qualified  right  of  use.    He  ha>  a  right  to  assume,  in  the  ab- 

•  nee  of  knowledge,  that  the  seller  passes  an  unconditional  title 

to  the  machine,  with  no  Limitations  upon  the  use.    Where,  then,  is 


->l     -I 


% 


1^ 


274 


Tn'DT'STRIAL   COMBINAriONS   AXD   Trt'sts 


the  line  belwcen  a  lawful  and  an  unlawful  civialillcation  upon  the 
use?  This  is  a  (jui'stidu  of  statutory  construction.  Ilut  with  whai 
t'vc  .--hall  we  read  a  nicanin;:  into  it?  It  is  a  statute  creating  and 
protecting  a  luonopoh'.  It  is  a.  true  monopdy,  one  having  its 
origin  in  ihe  ultimate  autiiorily,  the  Constitution.  Shall  wc  deal 
with  the  statute  creating  and  guaranteeing  the  exclusive  right  which 
is  granted  to  the  inventor  with  the  narrow  scrutiny  proper  when  a 
statutory  right  is  asserted  to  uphold  a  claim  which  i-^  lacking  in 
those  moral  eienie.its  which  appeal  to  the  normal  man?  Or  shall 
we  approach  it  as  a  monopoly  granted  to  subserve  a  broad  ])ublic 
jjolicy,  by  whirh  large  ends  are  to  be  attained,  and  therefore  to  he 
constrved  so  a>  to  give  effect  to  a  wise  ami  bnielicial  jturpose?  That 
we  mv.st  neither  transcend  the  statute  nor  cut  down  its  clear  nn'an- 
ing  is  plain 


If  the  -lii)ulatir,n  in  an  ag'(  enirnt  bet  .'.ecn  jiatentees  and  dealers 
in  jiatenled  artii  les.  which,  among  <.lher  things,  fixed  a  price  below 
which  the  patented  a  "tic!'  -  -houkl  not  be  >>  Id,  woul<l  be  a  reason- 
able and  \alid  condition,  it  must  follow  that  any  other  reasonable 
stipulation  not  inherently  violative  of  some  substantive  law,  im- 
posed by  a  patentee  as  i)art  of  a  sale  of  a  patented  machine,  would 
l)e  eeiually  valid  and  (.nforceable.  It  me-t  also  follow  that  if  the 
stipulation  be  one  whicti  (lualifies  the  right  of  u>e  in  a  machine 
sold  subject  thereto,  so  that  a  breach  would  give  rise  to  a  right  of 
action  upon  the  contract,  it  would  be  at  the  same  time  an  act  of  in- 
fringement, giving  to  the  i)atenti-e  l;is  choice  of  remediis. 

lUil  it  has  been  very  earnestly  said  that  a  condition  restricting 
the  buyer  to  use  it  only  in  connection  with  ink  made  by  the  patentee 
is  one  of  a  character  which  gives  to  a  patentee  the  power  to  extend 
his  mono])oly  so  as  to  cause  it  to  embrace  any  subject  not  within 
the  patent  which  he  chooses  to  require  that  the  in\ention  shall  he 
used  in  connection  with.  Of  course  the  argument  does  not  mean 
that  Ihe  effect  of  such  a  condition  is  to  cau^e  things  to  bedinn 
patented  which  were  not  so  without  the  requirement.  The  stencil, 
the  pajier,  and  the  ink  made  by  the  patentee  will  continue  to  1» 
unpatented.  Anyone  will  be  as  free  to  make,  sell,  and  use  lik; 
articles  as  they  would  be  without  this  restriction,  save  in  one  jwr 
licular,  namely,  they  may  not  be  sold  to  a  u.scr  of  one  of  the  pat- 
entee's machines  with  intent  that  they  shall  be  u<ed  in  violation 
of  the  license.     To  that  extent  competition  in  the  sale  of  such 


'II 


The  Patent  Monopoly 


275 


.irticlc-.  for  use  with  the  machiiu',  will  tx.-  afiVcted,  for  sale  to  such 
u>ers  fur  infriiiLnnf^  |)ur[)oses  will  constitute  contributory  infringe- 
nient.  liut  the  -ame  consequence  results  from  the  ^-ale  of  any 
article  to  one  wlio  proim-es  to  associate  it  with  other  article-  I-i 
infrin,;j;e  a  ]xUent  when  such  iiurjiose  is  known  to  the  seller,  liut 
touM  it  be  said  that  the  doctrine  of  contributory  infrinj^emenl 
operates  to  extend  the  monopoly  of  the  patent  over  >ul)jects  not 
within  it  because  one  subjects  hini>clf  to  the  penaltie-  of  the  law 
when  he  sells  unjjatented  things  for  an  infringing  use?  If  a  patente-' 
>avs,  ••!  may  su.jipress  my  patent  if  1  will;  1  may  make  and  have 
nude  devices  under  my  patent,  but  1  will  neither  >ell  nor  permit 
anyone  to  use  the  ])atented  things."  he  i>  within  his  right,  and  none 
can  coini)lain.  Hut  if  he  says,  'I  will  sell  with  the  right  to  use 
only  with  other  things  proper  for  using  with  the  machini'>.  and 
!  will  sell  at  the  actual  cost  of  the  machines  to  me,  provided  you 
will  agree  to  use  only  such  articles  as  are  made  by  me  in  connection 
therewilji,"  if  he  chooses  to  take  his  ])rot'it  in  this  way,  instead  of 
t.iking  it  l)y  a  higher  price  for  the  machine-^,  has  he  exceedid  his 
< Aclu-ive  right  to  make,  sell,  and  use  hi-  patente('  machines?  The 
■  Milat  for  the  >ale  of  -~uch  articles  to  the  u.-ers  of  hi^  machine, 
uhich,  by  such  a  condition,  he  takis  to  himself,  was  a  market  which 
he  alone  created  by  the  making  and  selling  of  a  new  invention. 
Had  he  kept  his  invention  to  liimself  no  ink  could  have  been  sold 
hy  others  for  use  ujxin  machines  emliodying  that  invention.  By 
selling  it  subject  to  tlu'  restriction  he  took  nothing  from  others  and 
in  no  wise  re.-tricted  their  legitimate  market. 


Neither  can  we  see  that  the  liability  of  the  defendant-  for  aiding 

ind  abetting  an  infringing  use  by  Miss  Skou  would  be  ditTerent 

;-.elher  she  had  made  her  machine  in  open  deliance  of  the  rights 

f  the  patentee  or  liad  bougiit   it   under  londitions  limiting  her 

right  of  use.     If  she  had  made  it,  slie  would  have  been  liable  to  an 

.iction  for  infringement  for  making,  and  if  slie  u>i.-i\  it  she  would 

l)ecome  li.ilile  for  such  infringing  use.     liut  if  the  defendants  knew 

!'  the  patent  and   that   she  had  unlawfully  made  the  patented 

rticle,  and  then  >old  Iter  ink  or  other  -uj^plie-,  without  whi(  h  she 

could  not  operate  the  maihiiu',  with  tlie  intent  and  purpose  th.it 

'u'  should  use  the  infringing  article  l)y  means  of  ihi-  ink  -upplird 

i'N  I'i'.em,  thev  would  assi.st  in  her  infringing  u.se. 


i 


276 


iNUrSTRIAl.    CoMHINATIONS    AND    TKrSTS 


■•  Coiitrllnitorv  in!ri!i,i,'cmciil.  "  >ay.>  Judfic  Townsend  in  Thomas'- 
HoiHton  Co.  ?.  KcUcy  Co.  (7 J  Fi-d.  Kv\)..  1016),  "h,;-  tjcfii  well 
dc!iiK(l  a>  llu'  inU-ntioiial  aidinji  of  oiu'  i)Lr-)n  by  anothc,  in  the 
unlawful  makin^i,  or  scUin^,  or  u>in.ii  of  tlie  ])atfnU'd  invention." 
To  the  same  cfk-ct  arc  Wallace  ;•.   Holmes  (2q  Fed.  Ca-es.  79); 


Ri^don  ;.    Trent   (().•    Fed.    Re[).,  ,^5 


/  -■> ' 


'rhoni>on-Hou>lon   Co.  v. 


Ohio  Bras.s  Works  (So  I'ed.  Rej).,  7JI );  .AnuTican  (irai)hoi)lione  Co. 
r.  ILi'Alhorne  (g:?  F'ed.  Rep.,  51O). 

In  the  Ri-don  case  a  member  of  the  lirni  which  made  the  plans 
for  the  construction  of  certain  mining  machinery  In  be  maile  in  the 
owner's  shop,  and  then  superintended  it^  erection  at  the  mine,  \\.i- 
held  to  be  guilty  of  infringement,  though  he  neither  personally 
made  nor  used  tlie  macliine-  wliich  \\\rv  lound  to  be  an  infringe- 
ment of  \  did  patent^.  In  Aineric m  Cr.ii'hnphone  ('<>.  :.  Haw- 
thorne one  who  >o!d  a  machini'  with  knowledge  that  it  was  to  be 
used  to  produce  an  infringing  article  was  held  to  be  liable  as  an 
infringer. 

For  the  purpose  of  testing  the  consequence  of  a  ruling  which  will 
supi)ort  the  lawfulness  of  a  sale  of  a  patented  macliine  l^r  use  only 
in  connection  with  supplies  necessary  for  its  o[)eration  liought  from 
the  patentee,  many  fanciful  suggestions  of  conditions  which  might 
be  imi/osed  l)y  a  patentee  have  been  prcssecl  upon  Us.  llui-  it  is 
said  that  a  patentee  of  a  colTee  pot  might  sell  on  ciMidilion  that  it 
be  Uscil  onl)-  with  colTee  bought  from  him,  or,  if  the  article  be  a 
circular  saw,  that  it  miglit  be  s.ild  on  condition  that  it  bi'  used 
onlv  in  sawing  lo'.js  i^rocuri'd  from  liim.  These  anil  oihiT  illustra- 
tion- are  used  to  indic.ite  that  thi.s  method  of  marketing  a  patented 
article  may  be  carried  to  such  an  extent  as  to  inconvenience  the 
public  andinvolve  innocent  people  in  unwitting  infringements.  Hut 
ttiise  illustrations  all  fail  of  their  purpose.  Ix-cause  the  jiublic  is 
always  free  to  take  or  refuse  the  p.itented  artiili'  on  the  terms  im- 
posed. If  they  be  too  onerous  or  not  in  keeping  with  the  l)i  net'it-, 
the  patented  article  will  not  find  a  market.  The  imblii .  b\  jur- 
mitting  the  invention  to  go  unused,  loses  nothing  which  it  had 
before,  and  when  the  patent  expires  will  l)e  free  to  use  the  invention 
without  compensation  or  restriction.  This  was  pointed  out  in  the 
paper-bag  case,  where  the  inventor  would  neither  use  himself  nor 
allow  others  to  use,  and  yet  was  held  entitled  to  restrain  infringe- 
ment, because  he  had  the  exclusive  right  to  keep  all  other  from 
using  during  the  lite  of  the  patent.  This  larger  right  embrau  the 
'  In  error;  should  be  "  Thomson." — Ed. 


Thi:  Patknt  Moxopoly 


277 


Ir^-cr  ni"  permittiiiL'  others  to  use  upon  such  term-  a-  \\iv  patentee 
iho(jse.>  to  prescribe.  It  rnu>t  not  be  lorf^olten  tliat  we  are  dealing 
vsith  a  constitutional  and  statutory  monopoly.  An  attack  u|)on 
the  rij^hts  undiT  a  patint  hecau-e  it  secures  a  nioro[)oly  to  make, 
to  -ell,  and  to  u-e  is  an  attack  upon  the  whole  patent  system.  We 
tire  not  at  lihcrtx  to  .'•'■'v  that  the  CousliluHon  has  un-u'isiiv  provided 
for  ii^ranting  a  monopolistic  right  to  inventors  or  that  Congress  has 
unwisely  failed  to  i>npose  limitations  upon  the  inventor's  exclusive 
right  of  use.  And  if  it  he  that  the  ingenuity  of  patentees  in  ilevising 
'^ays  in  ic'hich  to  reap  the  benefit  of  their  discoveries  requires  to  he 
restrained,  Congress  alone  has  the  poiver  to  determine  wiiat  restraints 

i-,;'tl  be  imposed.  As  the  lai^'  )io'c  stands  it  contaiiK  )ioiie,  and  the 
duty  'ix'hich  rests  upon  this  and  upon  every  other  eouit  is  to  expound 
the  la'u.'  as  it  is  'written.  Arguments  based  upon  suggestions  of  public 
policy  not  recognized  in  the  patent  laws  are  not  relevant.  The  field 
to  which  we  are  invited  by  such  arg:i»;ents  is  legislative,  not  judicial.^ 

The  decisions  of  this  court  as  we  lia\e  construeii  them  do  not  so 
limit  the  i)ri\ile,ue  of  the  patentee,  and  we  could  not  so  restrict  a 
l)atent  ^rant  without  overrulinj.;  the  lonu  line  of  judicial  deci-ions 
from  circuit  court.-  and  circuit  court-  oi  appi'al  hentofore  cited, 
thus  inllictin.i:  disastrous  result-  ui»on  iiu!i\  idual-  who  ha\e  made 
lari,'e  investments  in  reliance  uj)on  them. 

The  conclusion  we  reach  i-  that  tliere  is  no  difference  in  principle 
(ictween  a  sale  -^uhjet  t  to  -pecil'ic  restriction-  as  to  the  time,  i)lacc, 

r  j)urp(i-~e  of  u-e  and  restrictions  re(|uirin^  a  u^e  only  with  other 
ihitiizs  necessary  to  the  u-i- of  the  patented  article  purcha-ed  from 
the  patentee.  If  the  violation  of  the  one  kind  is  an  infringement, 
the  other  is  also 


Wo  come  then  to  the  question  as  to  whether  "the  act-  of  the  de- 
fendants con-litute  contributory  infrin;;ement  of  the  compl.iinants' 
patent." 

The  facts  upon  which  our  answer  mu-f  be  made  are  -omewhal 
meager.  It  ha>  been  urged  that  we  should  make  a  negative  reply 
t.i  the  interrogatory  as  certihed,  because  the  intent  lo  have  the  ink 

id  to  the  licensee  used  in  an  infringing  way  is  not  sufTiciently  made 

it.  I'ndoubtetiiy  a  i)are  suppo-ition  that  by  a  sale  of  an  article 
which,  though  adapted  to  an  infringing  use,  is  also  adapted  to  other 

• 'i  lawful  uses,  is  not  enough  to  make  the  seller  a  contributory 
'  It-ulic!!  are  Iho  editor'*. — Ed> 


■3 

1 

1 

■B^^^^^ 

1 

278 


IXDISTKIAI     CoMlUNXTIOXS    AM)   TrI'STS 


infrinj^er.  Such  a  rule  WduKi  lilock  the  \vh^■cl^  of  cwmmercc.  There 
murilTje  an  intt-nt  and  [mrpo-c  that  the  article  sold  wiil  be  so  used. 
Such  a  presumption  ari^e^  when  the  article  so  sold  is  only  adapted 
to  an  infrintrint;  use.  Rup[)  v.  KUiott  ( i  ^i  l'"e(l.,  7  :;c).  It  may  also 
be  inferred  where  it.-  nio-t  conspicuous  u>e  is  one  which  will  cooper- 
ale  in  an  inlrir.^enient  when  sale  to  >uch  user  is  involad  by  adver- 
tisement. Kalem  Co.  v.  Harper  Brothers,  decided  at  tliis  term  and 
not  vet  reported. 

These  defendants  are,  in  the  facts  certified,  stated  to  have  made 
a  direct  sale  to  the  u.-er  of  the  itatented  article,  uith  knowU(l,;^e 
that  under  the  license  from  the  patentee  she  could  not  use  the  ink, 
sold  by  them  directly  to  her,  in  connection  with  the  licen>ed  iiia- 
cliine,  without  infrinp;cment  of  the  monoixily  of  the  patent.  It  i> 
not  open  to  them  lo  <,iy  th.at  it  nii,i,'ht  be  u>ed  in  a  noninfrin;,Mnj:  way, 
tor  the  certified  fact  is  that  they  made  the  sale  "with  the  exjjecta- 
tit)n  that  it  would  be  u^ed  in  collection  with  said  mimeo-rraph." 
The  fair  interjiretation  of  the  facts  >tated  is  that  the  sale  wa>  with 
the  purjiose  and  intent  tl);'J  it  would  be  so  u.-^ed. 

So  understandint;  the  import  of  the  (juestion  in  connection  with 
the  facts  certitled,  we  mu-t  an-wer  the  (lue^lion  certilied  afiirma- 

tivelv. 

Mr.  Justice  Day  did  not  hear  the  argument  and  took  no  part  111 
the  decision  of  this  case. 

Mr.  Chief  Justice  Wiriti;.  with  whom  concurred  Mr.  Justice 
Hrc.iiKS  and  Mr.  Ju>tice  I.wiak,  di-scntint:: 

My  reluctance  to  dissent  is  overcome  in  this  ca>e:  I'irst.  because 
the  ruling  now  made  h.i'^  a  much  wider  scope  than  the  mere  intir(-l 
of  the  parties  to  this  record,  >ince,  in  my  opinion,  tlie  ellei  t  of  tluil 
ruiin^j  is  to  destroy,  in  a  \try  larj^e  mea-uri\  the  judicial  aidhorit}' 
of  the  States  by'  unwarrantedly  exteiidini:  the  Feder.d  judicial 
power.  Second.' because  the  result  ju-t  -t.ited.  by  the  inevitabii' 
d.Ailopmcnt  of  the  i>rinciple  announced,  may  not  be  conluied  tn 
-p.iradic  or  isolated  cases,  but  will  be  a->  broad  as  society  it-elf. 
alTectinR  a  multitude  of  people  and  cajiabl  of  operation  upon 
every  conceivable  subject  of  human  contract,  inlere- 1,  or  activity. 
however  intensely  local  and  e\clusi\ely  within  Slate  authority 
thiy  othiTwise  m"ii;ht  be.  Third,  because  the  gravity  of  the  lon- 
se(|uenc(  -  which  wnuld  ordinarily  ari-e  from  -uch  a  re-ull  i-  ure.dly 
afjgrav:ited  bv  the  ruline  mow  madi-,  -imc  that  rulini:  n<it  onK 
vastly  extend-  the  I'ederal  judicial  power,  a-  .diove  -lated,  but  ,1- 
to  all  the  innumerable  .-ubjects  to  which  the  ruling  may  be  made  tv 


The  Patent  Monopoly 


-79 


dimply,  makes  it  the  duty  of  the  courts  of  the  United  States  tu  test 
the  ri,t;ht.>  and  obiigiitiuns  of  the  parlie>,  not  Ijy  the  general  law  of 
the  land,  in  accord  with  the  cunforniily  act,  but  by  the  provision:^ 
,.i  the  i)atent  law,  even  although  the  sul)jects  considered  may  nnt 
he  within  the  embrace  of  that  law,  thus  disregarding  the  State  law, 
u\erthrowing,  it  may  be,  a  settled  public  policy  of  the  State,  and 
iniuriou>ly  alTecting  a  multitude  of  persons.  Lastly,  I  am  led  to 
express  the  reasons  which  constrain  me  to  dissent,  because  of  the 
hiipe  that  if  my  forebodings  as  to  the  evil  conseciuinces  to  re-ult 
from  the  api)lieation  of  the  construction  now  given  to  the  patent 
statute  be  well  founded,  the  ^tateI;lent  of  my  reasons  may  serve  a 
twofold  purpo-e:  Fir-t,  to  suggest  that  the  ai>plicaUon  in  future 
cases  of  the  construclit)n  now  given  be  confined  within  the  narrow- 
est limits,  and,  second,  to  serve  to  make  it  clear  that  if  evil-  arie 
tl'.eir  continuance  will  not  becau-ed  l)y  the  inter[irelation  now  given 
\n  the  statute,  but  uill  result  from  the  inaction  of  the  Ic'^islalive 
department  in  failing  to  amend  the  slatutr  so  as  to  avoid  such  evils.' 


i  can  not  bring  my  mind  to  assent  to  the  conclusi<in  referred  to, 
and  shall  state  in  the'  light  of  reason  and  authority  why  I  can  nut  do 
so.  As  I  have  slid,  the  ink  was  not  covered  by  the  patent;  indeed, 
it  is  stated  in  argument  and  not  denied  that  a  prior  patent  which 
covered  the  ink  had  exjiired  before  the  sale  in  que-tion.  It  there- 
fore results  that  a  claim  for  the  ink  could  not  ii  !\c  b; .  .1  lawtully 
embraced  in  the  pat(  lit,  and  if  it  had  been  by  inadvertu.ee  allowed 
>uch  claim  would  not  ha\e  been  enforceable.  This  curious  anomaly 
then  results,  that  tli.it  which  wa-  not  (rubra'.  ■.  il  by  tlie  p-._itent, 
which  could  not  luve  been  enil)raced  therein  and  which  if  mistak- 
enly allowed  and  included  in  an  exjiress  claim  would  li.i\e  been 
ineiricacious,  is  now,  by  the  elTect  of  a  contract  held  to  be  embraced 
by  the  iiatent  and  covered  by  the  patent  law._  Thi-  inevitably 
I  ni~e-  the  conti  ntions  now  upheld  to  come  to  this,  that  a  patentee 
in  >elling  till'  machine  covered  by  hi>  jiatenf  lia-  power  liy  contract 
to  extend  tlie  patent  so  .-s  to  cause  il  to  embrace  things  which  it 
docs  not  include;  in  other  words,  to  exercise  legislative  power  of  a 
f.ir-reaching  and  dangerous  character.  Looking  at  it  from  another 
jinint  of  view  and  te  ting  the  contention  by  a  consideration  of  the 
rights  jjrolected  l)y  the  patent  law  and  the  rights  which  an  invmtor 
whoolHains  a  i>at'ent  take<  under  that  law.  the  proposition  reduces 
'  luliLa  arc  the  editor's. 


ih 


28o 


InUCSTKIAL    CCJMHINATIONS    AND    TRUSTS 


itself  to  the  same  amclusiun.  The  nat  ural  right  of  anyone  to  make, 
vend,  and  use  his  invention,  which  but  for  the  patent  law  mi<^ht  be 
invaded  by  others,  is  by  that  law  made  exclusive,  and  hence  the 
power  is  conferred  to  eNclude  others  from  making,  using,  or  vend- 
ing the  patented  invention.  (Paper  Bag  case,  210  U.  S.,  424-425, 
and  cases  cited.) 

The  exclusive  right  of  use  of  the  invention  embodied  in  the  ma 
chine  which  the  patent  protected  was  a  right  to  use  it  anywhere  and 
evervwhere  for  all  and  every  purpose  of  which  the  macnine  as  em- 
braced by  the  patent  was  susceptible.  The  patent  was  solely  uj)on 
the  mechanism,  which,  when  opi rated,  was  capable  of  producing 
certain  results.  .\  patent  for  this  niechani>m  was  not  concerned  in 
any  wav  with  the  materials  to  be  used  in  operating  the  machine, 
and  certainlv  the  riglit  prdtectrd  by  the  patent  was  not  a  right  to 
use  the  mechani-m  with  any  particular  ink  or  other  o[)erative 
materials.  Of  course,  as  the  owner  of  the  machine  possessed  the 
ordinary  right  of  an  owner  of  property  to  use  such  materials  as  he 
pleased  in  operating  hi-  patented  machine  and  had  the  power  in 
selling  his  machine  to  .mpose  such  conditions,  in  the  nature  of 
covenants  not  contrary  to  public  policy  as  he  saw  tit,  I  shall  assume 
that  he  had  the  I)owit  t.)  exact  that  the  ]iurcha.-er  should  use  only 
a  particular  character  of  material-.  IJut  as  the  right  to  employ 
any  desired  o{>erative  niaterials  in  u-ing  the  patenti'd  machine  was 
not  a  right  deri\  ed  from  or  protected  by  the  patent  law,  bui  was  a 
mere  right  arising  from  the  ownershij)  of  property,  it  can  not  be 
said  that  the  restriction  concerning  the  use  of  the  materials  was  a 
restriction  upon  the  use  of  the  machine  ])rotectcd  by  the  patent 
law.  When  I  say  it  can  not  be  said  I  mean  that  it  can  not  be  so 
done  in  reason,  >\ncv  the  inevitable  result  of  so  doing  would  be  to 
declare  that  tin-  p.ilent  ])nitectKl  a  use  which  it  did  not  embrace. 
.And  this,  after  all,  >erves  to  demonstrate  that  it  is  a  mi-conciption 
to  (|ualify  the  rolriclion  as  one  on  the  u~e  of  the  machine,  when  in 
truth  both  in  form  and  substance  it  was  but  a  restriction  ujxin  the 
use  of  materials  cai)able  of  being  employed  in  operating  the  machine. 
In  other  words,  every  use  which  the  patent  protected  was  trans- 
ferred to  Miss  Skou,  and  the  very  existenci'  of  the  particular  re- 
striction under  consideration  presui)poses  such  right  of  complete 
enjoyment,  and  because  of  its  possession  there  was  engrafted  a  con- 
tract restriction,  not  upon  tlie  use  of  the  machine,  but  upon  the 
materials.  And  these  con-iideratii)ns  are  ecjually  ap[)licable  to  the 
exercise  of  the  e.\clusive  right  to  vend  protected  by  tlu'  patent  un- 


Tm:   Paii:m    Monopoly 


less  it 


ran 


lie  said  that  hv  tlu  act  of  >eliii 


A  all  the  use  of  w 


patented  machine  and 


ucn  1 


I  is  capable  a  jjatentec  is  endowed 


\\i 


th  the  power  to  amplify  hi.-,  [jalenl  hy  rausin<;  it  to  cover  in  the; 


future  things  which  at  the  time  of  t 


le  -ale 


it  did  not  embrace 


Bui  liie  result  of  this  analysis  server  at  once  a^'ain  to  establish, 
from  another  point  of  view,  that  the  rulini:;  now  niatle  in  etTect  is 
that  the  patentee  has  the  ptnver,  by  contract,  to  extend  his  patent 
ri^'hts  so  as  to  brini,'  -ithin  the  clamis  of  his  patent  things  which 
arc  not  embraced  thcein,  thus  virtually  lef^islatinj^  by  causing  the 
jjatent  laws  to  ccner  subjects  to  which,  without  the  exercise  of  the 
right  of  contract,  '  h''y  could  not  reach,  the  result  being  not  only  to 
multiply  monopolies  at  the  will  of  an  interoted  party,  but  also  to 
destroy  tlie  jurisdiction  of  the  State  courts  over  subjects  which 
from  the  beginning  ha\c  been  within  their  authority. 

The  vast  extent  to  which  the  :esults  just  stated  may  be  carried 
will  be  at  once  apparent  by  considering  the  facts  of  this  case  and 
hearing  in  niind  that  this  is  not  the  -uit  of  a  patentee  against  one 
with  whom  he  has  contracted  to  enforce  as  again-t  such  [)er>on  an 
act  done  in  violation  of  a  contract  as  an  infringement,  iiut  it  is 
against  a  third  per-on  who  happened  to  deal  in  an  ordinary  com- 
modity of  general  use  with  a  person  with  whom  the  i)atentec  had 
contracted.  And  this  statement  shows  that  the  effect  of  the  ruling 
is  to  make  the  \-irtual  legislative  authority  of  the  owner  of  a  {)at- 
cnted  machine  exttnd  to  evcr\-  human  i)eing  in  society,  without 
reference  to  their  jjrixity  to  any  contract  existing  between  the  pat- 
entee and  the  one  to  whom  he  has  sold  the  patented  machine.  It  is 
Worthy  of  observation  that  the  vast  j-ower  which  the  ruling  confers 
upon  the  holders  of  i)atented  iir.entions  does  not  alone  cause  con- 
troversies which  otherwise  would  be  subject  to  the  State  jurisdic- 
tion to  become  mattiTs  of  exclusive  Federal  cognizance,  but  subjects 
the  rights  of  the  parties  when  in  the  Kedtral  forum  to  the  patent 
law.  to  the  exclusion  of  the  State  law  which  otherwise  would  a[)- 
ply.  and  it  may  be  to  the  overthrow  of  the  settled  public  policy 
<if  the  State  wherein  the  dealings  involved  take  i)lace.  .All  ihe-e 
results  are  in  a  measure  comprehen<i\ely  portraved  bv  the  decree 
of  the  circuit  court.  They  are,  moreover,  \i'idlv  shown  bv  a  ref- 
erence made  by  the  court  to  and  the  jiutting  aside  as  inai)j)licable 
of  a  jirevious  decision  of  this  court  (Miles  Medical  Co.  v.  Park  & 
S'His  Co.,  220  U.  S.,  7,-jT,)  which  if  hero  applied  would  cause  the 
alleged  license  to  be  held  void  as  against  public  policy.  .\s  tlie 
theory  upon  which  the  Miles  Medical  Co.  case  is  treated  as  inai^pli- 


iili 


1        >l 


282 


Industrial  Combinations  and  Trusts 


cable  is  that  this  case  is  one  governed  by  the  patent  laws,  and  there- 
U)re  not  within  the  rule  of  public  policy  which  the  .Miles  case  ap- 
plied, it  is  made  induljitably  clear  that  the  ruling  now  announced 
endows  the  patentee  with  a  right  by  c^iutract  not  only  1o  produce 
the  fundamental  change  as  to  jurisdiction  of  the  State  and  Federal 
courts  to  which  I  have  referred,  but  also  to  bring  about  the  over- 
throw of  the  public  policy  both  of  the  State  and  Nation,  which  I 
at  th('  outset  indicated  was  a  consequence  of  the  ruling  now  made. 

I  do  not  think  it  necessary  to  >top  to  point  out  the  innumerable 
subjects  which  will  be  susceptible  of  being  removed  from  the  opera- 
tion of  State  judicial  pt)wer  and  the  fundamental  and  radical  char- 
acter of  the  change  which  must  come  as  a  result  of  the  principle 
decided.    But,  nevertheless,  let  me  give  a  few  illustration.-: 

Take  a  patenter  selliu;^  a  patented  eni^ine.  lie  '.^■Ul  now  have  the 
right  bv  eontraet  to  bring  under  the  patent  laws  all  eontracts  for  eoal 
or  elee'trieal  energy  uskI  to  ajjord  power  to  work  the  maehine  or  even 
the  Inbrieants  employed  in  its  operation.  Take  a  patented  earpenter  v 
plane.  The  power  ')!ow  exists  in  the  patentee  by  eontraet  to  validly 
confine  a  earpenter  pnrehasing  one  of  the  planes  to  the  use  oj  lumber 
sawed  from  trees  grown  on  the  land  of  a  particular  person  or  sawed 
bv  a  p'artieular  mill.  Take  a  patented  cooking  utensil.  The  power  ;v 
now  recognized  in  the  patentee  to  bind  by  contract  one  who  buys  the 
utensil  to  use  in  connection  with  it  no  other  food  supply  but  that  sold 
or  made  bv  the  patentee.  Take  the  invention  of  a  patented  window 
frame.  It  is  now  the  law  that  the  seller  of  the  frame  may  stipulate 
that  no  other  material  shall  be  used  in  a  house  in  which  the  window 
frames  are  placed  except  such  as  may  be  bought  from  the  patentee  and 
seller  of  the  frame.  Take  an  illustration  which  goes  home  to  everyone-  - 
a  patented  'sewing  machine.  It  is  now  established  that  by  putting  on 
the  machine,  in  addition  to  the  notice  of  patent  required  by  hu.'.  a  notice, 
called  a  license  restriction,  the  right  is  acquired,  as  against  the  whole 
world,  to  control  the  purchase  by  users  of  the  machine  of  thread,  nccdh\-^. 
and  oil  lubricants  or  other  materials  convenient  or  necessary  for  opera- 
tion of  the  macl.inr.^  Tlie  illustrations  niiglit  be  multiplied  in- 
definitely. That  they  are  not  imaginary  is  now  a  matter  of  com- 
mon knowledge,  ior,  as  the  result  of  a  case  decided  some  years  ago 
by  one  of  the  circuit  courts  of  appeal,  which  has  been  foUown! 
by  cases  in  other  circuit  courts  of  ajjpeal.  to  which  reference  will 
hereafter  be  made,  what  prior  to  the  first  of  tlio-^e  decJMons  on  a 
sale  of  a  patented  article  v. as  designated  a  condition  of  sale,  go\ - 

'  Italics  are  tlu'  itlilor's. 


Tin;  Patent  Monopoly 


A^ 


crncd  by  the  gfiicral  principles  of  law,  has  come  in  practice  to 
be  (Icnomiriated  a  license  restriction,  thus,  by  the  chanj^e  of  form, 
under  the  doctrine  announced  in  the  cases  referred  to,  bringing 
the  matters  covered  by  the  restriction  within  the  exclusive  sway" 
of  the  patent  law.  As  the  transformation  has  come  about  in  prac- 
tice since  the  decisions  in  question,  the  conclusion  is  that  it  is 
attributable  as  an  effect  caused  by  the  doctrine  of  those  cases. 
And,  as  I  have  i)reviously  stated,  it  is  a  matter  of  common  knowl- 
edge that  the  change  has  been  frequently  resorted  to  for  the  pur- 
pose of  bringing  minierous  article^  of  common  uce  within  the  nionop- 
ily  of  a  patent  when  otherwise  they  would  not  have  been  embraced 
therein,  thereby  tending  to  subject  the  whole  of  society  to  a  wide- 
.-pread  and  irksome  monopolistic  control. 


'i' 


I  pass  by  the  Kngli>h  decisions  relied  upon  with  the  remark  that 
it  is  not  jierceived  how  they  can  have  any  persuasive  influence  on 
:he  subject  in  hand  in  \iew  of  the  di>tinction  l)etween  State  and 
national  power  which  here  [jrevails  and  the  conse(|uent  necessitv, 
if  our  institutions  are  to  be  preserved,  of  forbic'ding  a  use  of  the 
patent  laws  which  serves  to  destroy  the  lawful  authority  of  the 
States  and  their  public  policy.  I  fail  also  to  see  the  api)lication  of 
Knglish  cases  in  view  of  the  [possible  diflerence  between  the  public 
policy  of  Great  Britain  concerning  the  right,  irrespective  of  the 
patent  law.  to  make  contracts  with  the  monopolistic  restriction 
which  the  one  here  recognized  embodies  and  the  public  policy  of 
the  United  States  on  that  subject  as  established,  after  great  con- 
sideration, b_v  this  court  in  Miles  iMedical  Co.  v.  Park  &  Sons  Co. 
(220  U.  S..  37,^).  See  es])ecially  on  this  subject  the  grounds  for 
dissent  in  that  case  expressed  by  Mr.  Justice  Holmes,  referring  to 
the  English   law,  on   i>age  413. 


i! 

if 


lli   !l 


-Ml 


15ut  e\en  if  I  were  to  put  aside  everything  I  have  said  anri  were 
to  concede  for  the  sake  of  argument  that  the  power  existed  in  a 
patentee,  by  contract,  to  accompli-h  the  results  which  it  is  now- 
held  may  be  ctYected,  I  ne\ertheless  would  be  unable  to  gi\  e  my 
a-sent  to  the  ruling  now  made.  If  it  be  that  so  extraordinary  a 
IHiv.-er  of  contract  is  vested  in  a  patentee,  I  can  not  escape  the  con- 
clusion that  its  exercise,  like  every  other  jiower,  -hould  tie  subject 


%'' 


284 


I.NUUSI'KIAl.    (ii.MLlN  AlKiNS    AND    TrISTS 


t(i  the  law  of  the  land.  To  conclude  otherwise  would  he  hut  to  ?ay 
that  there  was  a  vast  zone  of  contract  lyinj^  jjetween  rights  under  a 
patent  and  the  law  of  the  land,  where  lawlessness  prevailed  ar.il 
wherein  contracts  cuuld  he  made  whose  effect  and  operation  wuuUl 
not  he  contined  to  the  area  descrihed,  hut  would  he  op(  ralive  and 
tl'fective  heyond  that  area,  so  as  to  dominate  and  limit  rights  of 
every  one  in  society,  the  law  of  the  land  to  the  contrary  notwith- 
standing. 


What  could  more  cofjently  serve  to  jioint  to  the  reality  and  con- 
clusiveness of  these  sutmestions  than  dn  the  facts  of  this  case.-*  It  is 
admitteil  that  the  use  of  the  ink  to  work  the  patented  machine  was 
not  enihraced  in  the  patent,  and  yet  it  is  now  held  that  hy  contract 
the  use  of  materials  not  acquired"  from  a  de>is:;nated  M)urce  has  he- 
come  an  infringement  of  the  patent,  and  exactly  the  same  law  i^ 
api)lied  as  thouj:;h  the  ]:atent  in  express  terms  covered  the  use  of 
ink  and  other  operative  materials.  It  is  not,  as  I  un(ler>tand  it. 
denied;  and  if  it  were.  In  the  face  of  the  deci>ion  in  the  Miles  Medi- 
cal Co.  case,  supra,  in  reason  it  can  not  he  denied  that  the  particular 
contract  which  oi)erates  this  result  if  tested  hy  the  general  law 
wt)uld  he  void  as  against  i)uhlic  policy.  77;r  contract,  therefore, 
can  only  he  maintained  upon  Ihe  assumption  that  the  patent  An.'  and 
the  issue  of  a  patent  is  ihe  i^eneratint:,  SiUiree  of  an  authority  to  eon- 
tract  to  procure  rights  under  the  patent  lai^  not  otlier'U'ise  '.vithiu  that 
la-^\  and  which  could  not  be  enjoyed  under  the  (genera!  law  of  the  land.f 
But  here,  as  upon  the  main  features  of  the  case,  it  >eems  to  nie  tliis 
court  has  spoken  so  authoritatively  a>  to  leave  no  room  for  >uch 
a  view. 

'  lulits  arc  the  editor's. 


■  r 


CHAPTER  XI 

THK  .\ns()R['Tio\  OF  Trn:  TK\\r>sr;K  com, 

KAlI.kOAl;  COMl'.WN 


FROX  Axn 


It  is  a  matter  ul"  much  rc^re't  that  -pare  ddcs  not  jxTmit  the 
inlrochiction  of  ^L•veral  cshiliits  on  thf  ah.-orplion  of  the  Tennessee 
Coal.  Iron  and  Railroad  Company  by  the  I'liited  States  Steel 
Corporatbn.  A  lar^e  mass  of  testi.nony  upon  that  subject  is 
a\ailaljle  in  the  Stanley  Inve-ti;,'ation.  Excerpts  from  the  testimony 
ot  Messrs.  Schley  and  Ledyard.  Colonel  Roosevelt  and  others 
would  have  added  much  to  thi'  bock.  It  is  ho[)ed  however  that 
the  narrati\-e  which  follows  will  be  sutTicient  to  enable  the  reader 
In  understand  th'-  transaction  in  its  general  outlines.  It  should 
hf  added  that  tlieoihcr  testimony  does  not  corroborate  Judge  Gary 
in  all  iioints. — Ed. 

Exiiiiiii   I 

XARRATIVF.  OF  JIDGF,  ELBFRT  li.  GARY  * 

Mr  LiTTLKTOX.  1  will  call  your  attention  to  a  statement  made  by 
Mr.  John  Moody,  and  ask  you  it  you  dissent  from  it  or  agree  with  it: 
The  .icquisition  of  this  organization — 

That  is,  the  Tennessee  Coal  &  Iron  Co. — 

1=  added  great  potential  value  to  the  ?tcel  orRani'-tion  and  hai  increased 
r  tan,','ible  o(iuity  of  its  common-stock  i.-siic  to  a  i  r  Rreater  c.\tent  tiian  is 
:i!inoi,!y  rcali.ad.  The  Tennessee  Coal  &  Iron  properties  embrace,  besides 
iij'.portant  manufiu  iuripsx  plants,  nearly  450,000  acres  of  mineral  lands  in  the 
liirniinfiham  section  of  .\labama.  .Vs  shown  in  the  report  of  the  Tennessee 
Co.  in  1004.  when  an  appraisal  was  made  by  outside  parties,  these  lands  con- 
tain api)ro.\iniately  400,000,000  tons  of  llrst-class  low-grade  ore  and  more  than 
i.joo.ooo.ooo  tons  of  coal,  of  which  about  one-half  is  coking  coal.  This  esti- 
mate indic.ites  that  the  deposits  embraced  are  even  in  excess  of  those  of  the 
l-'rcat  LaV:e  .Superior  properties  controlled  by  the  corporation,  including  the 
fireat  Xorthirn  ore  bodies.  This  entire  proi)erty  was  acquired,  as  is  well 
known,  on  very  fi\oraljlc  terms. 

That  I  do  not  ask  you  to  assent  to,  but  I  wish  to  ask  you  about 
that.  The  description  given  there  in  that  article  is  substantially 
•  itrect? 

Hearings  before  the  Committee  on  Investigation  of  United  States  Steel 
L^j.-poralion,  Oind  Cong.,  ^nd  Sess.,  lyii-iyu,  pp.  i;4-i43. 

^S5 


286 


InUUSTRIAI.    CoMHINAriONS    AM)     IkLiI.; 


Mr.  (iAKV.   I  (it)  not  a.t^rcc  wiln  tint  at  all.  no. 

Mr.  LiTTi.t;T()\.  How  much  ore  diel  it  add  to  the  pos.scssions  of 
the  L'nitcd  Slates  Steel  Corporation? 

Mr.  Gary.  There  was  an  e>tinuite,  at  the  lime  we  purchased,  (it 
700,000,000  tuns  of  ore.  alx.ul  400,000  lon>,  a>  I  remember,  of  which 
wa-."usable,  on  top  of  the  other— usable  by  their  method.  Howev.  r, 
as  you  know,  probably,  it  was  an  inferior  ^'rade  of  ore  and  not  oi 
very  f;real  value,  in  my  opinion,  for  reasons  which  I  will  «ive  il 
you  desire.  You  could  hardly  consider  that  in  connection  with  tl;e 
Lake  Superior  ores,  so  called,  or  as  adding  to  the  Lake  Superior 

ores.  . 

Mr.  Litti.i;t()N.  I  asked  you  the  question  so  as  to  make  il  clear. 

Mr.  CiARY.  Yes. 

Mr.  Littleton.  What  do  you  consider  was  the  amount  of  ore  you 
obtained  bv  reason  of  procuring  control  of  the  Tennessee  Coal  & 

Iron  Co.? 

.Mr.  Gary.  1  l)elieve  we  obtained  live  or  -i\  hundred  million  tons 
of  ore.  a  portion  of  which,  at  lea:-t,  was  at  prc;-ent  u-able  in  that 
locality,  jtrovided  there  was  a  market  for  it— that  is,  a  niarketfor 
the  iron  or  the  -teel  whii  h  could  be  manufactured  at  that  point. 

Mr.  LiTTi.r.TDN.  How  much  coal  did  you  accpjire  by  the  acquisi- 
tion of  the  Tennt  s.-ee  Coal  vS:  Iron  Co.? 

Mr.  Gary.  We  suppose  a  large  body;  perhaps  more  than 
1,000,000,000  ton.-,  and  perhaps  1,000,200.000,  as  stated  there. 

Mr.  LiTii.KToN.   Did  vou  consider  that  a  valuable  acquisition:- 

Mr.  Gary.  Whv,  it  had  value,  of  course;  but  there  was  plenty 
of  coal  like  it  whlt'h  could  l)e  bought  at  a  very  low  price,  and  there 
is  a  good  deal  vet.  And  there  is  i)lenty  of  ore  property  like  that 
which  could  be  bought,  and  can  be  at  the  i)re-ent  time,  I  think, 
by  the  acre,  at,  say  850  to  Sioo  an  acre.  Some  of  you  will  know 
what  that  means. 

Mr.  Littli;t()N.  Was  the  Tennessee  Coal  &  Iron  ore  a  good  grade 
for  the  making  of  ordinary  pig  iron? 

Mr.  Gary.  That  could  be  utilized  in  the  manufacture  of  iairly 
good  pig  iron,  at  a  certain  cost. 

Mr.  Littlkton.  What  did  the  property  consist  of  in  the  way  ot 
improvements  for  the  purpose  of  mining  and  making  stet^l;  or,  to  lie 
more  specilic,  what  was  the  output  of  the  furnaces,  per  ton,  per 

annum? 

Mr.  Gary.  .\  full  statement  of  the  [properties  of  that  comiKiny,  .n 
thai  lime,  is  found  on  pages  26  and  27  of  the  annual  report  of  1907. 


AliSORl'TloN    OK     [HK    TeNXKSSKE    RaII.ROAD    CoMP.WY       2S7 


I  ■  r 


Mr.  1.1  iTiKToN.  I  am  not  goinj];  to  follow  the  details  of  that  so 
closely  a.>  to  re(iuire  consultation.  .MI  that  1  am  i^'oinj^  to  do  is  to  ask 
you  the  to[)ical  (jueslions  and  then  <,'o  to  another  jjoint.  It  has 
l)een  stated  that  the  capacity  of  the  blast  furnaces  of  the  comi:)any 
in  Kjoy  was  about  lOo.ooo  tons  per  annum— that  is,  I  speak  of  the 
Tennessee  Coal  &  Iron  Co.? 

Mr.  Gary.  That  i>  probably  rif;ht. 

.Mr.  LiTTLKTox.  .\nd  that  of  the  developed  coal  and  ore  mines 
about  20,000  toii>  per  day? 

-Mr.  Gary.  That  may  be  right.  I  do  not  know.  That  is  [)robably 
rij^ht.  In  the  year  kjoj  there  was  produced  about  1,500,000  tons  of 
ore — that  anKnint  was  mined:  there  were  iiruduced  about  244,000 
tt)ns  of  limestone  and  dolomite;  and  coal,  i'\e  lusive  of  cokinj?  coal, 
u!>out  1,700,000  tons;  and  of  coke,  about  1,100,000  tons.  There 
were  602,000  tons  of  pig  iron,  al)out;  o])en-hearth  steel,  ingots,  and 
castings,  about  243,000  tons;  rails,  about  149,000  tons;  billets, 
])latcs,  and  bars,  about  38,000  tons. 

Mr.  LiTTLETO.N-.  This  article  which  I  called  your  atte 
which  I  have  consulted,  continues  with  this  statement: 


ntum  to. 


If  we  compare  tlii-;  cainuity  with  that  of  the  actual  ;)ro(lucti<in  of  all  th 


other 

(loal  &  Iron  Ci 


>roperties  owncii  by  the  Steel  Corjioratit 


lor 


the 


lutside  of  the  Teniies 


year  IQ07,  we  will  >;ct  the  following  result.-;:  Hlast- 


furnace  products,  io,8i(),q08  tons;  ore  and  coal  mined  and  limestone  quarried, 


.•>'>..i 


70.161  tons.     In  other  words,  the  capacity  of  the  new  propertie 


aciiuireil 


accordinfj;  to  the  tij,'ures  above,  is  about   15  per  cent  of  the  total  producti 
of  niinins  profiucts  of  the  entire  corijoratiun  fur  last  year  and  about  S  per  cent 
ul  the  blast-furnace  products. 

Mr.  Gary.  I  have  given  you  the  production,  and  I  am  prepared 
ti)  give  you  the  results  in  ligures  of  operations  before  we  secured  ilie 
iiroperty.  and  since,  alter  an  expenditure  of  $15,000,000  or  nKjre 
by  u^,  including  the  payment  of  $6,500,000  which  the  company 
owed  when  we  took  it  over.  These  values  hinted  at  are 
fictitious. 

Mr.  LiTTLKTO.v.  What  was  the  capitalisation  of  the  Tennessee 
("oal  &  Iron  Co.  at  the  tim.e  you  took  it  over? 

Mr.  Gary.  I  gave  that. 

.Mr.  LiTTi.ETox.  832,000,000,  was  it  not? 

.Mr.  (iAKv.  There  was  S2C),o5o,ooo  of  common  slock  and  Si  24,000 
and  over  of  i)referrcd  stock.  The  bonded  indebtedness  was  $14,4  ig,- 
oco,  and  purch;ise-rnoney  notes,  SS26,ooo.  It  owed  current  liabili- 
ties, llcKiting  debt,  S4,iO.S,io2,  coiihiderable  of  which  was  pa»t  due. 


288 


Indvstki Ai.  Combinations  and    I  rusts 


Mr.  LiTTiJ-.TuN.  Did  you  or  your  compmy  solicit  the  purchase 
of  the  Tennessee  Coal  &'lron  Co..  or  was  it  ollered  to  you  by  ihoM' 
who  had  the  authority  to  sell  it? 

Mr.  Gary.  It  was  otTered,  one  way  ur  another;  offered  many 
times,  at  aVwut  the  time  we  a;  quired  it.  It  was  offered  by  Lewi. 
Cass  I.edyanl,  who  wa-  the  attorney  for  C^ll.  Oliver  Payne,  and 
who  had  l)een  interviewed  bv  Mr.  Schley,  of  Moore  &  Schley;  and 
1  would  like  to  sui^'.^esl,  if  I  may,  tliat  1  think  Mr.  Lewis  Cass 
Ledyard  ought  to  be  subpanaed  to  state  the  exact  facts  which  led 
up  to  his  coming  to  J.  P.  Morgan  to  beg  him  to  suggest  to  the 
United  States  Steel  CorjKiration  the  propriety  and  the  necessity 
for  the  i)urchasc  of  those  properties. 

Mr.  Lmtli-tun.  Vou  understand  it  to  be  a  lact  that  he  will  br 

subpce.iacd,  Judge  Gary,  if  he  can  shed  any  light  on  this  question. 

Mr.  Gary.  I  am  vry  sure  his  testimony  will  sdtle  the  question 

whether  we  desired  to  purchase  the  property,  or  whether  the  owners 

desired  to  sell  the  property. 

Mr.  Littlt.ton.  Your  understanding  is  that  Mr.  Ledyard  came 
to  Mr.  Morgan  as  the  initial  step  in  the  transaction? 

Mr.  Gary.  No  doubt  aboui  it;  a.id  I  would  be  very  glad  to  give 
you  the  history  of  it,  so  far  as  I  know  it,  if  you  desire. 
Mr.  Littleton.  1  wish  you  would. 

Mr.  Gary.  \'erv  well.  In  one  way  or  another  the  stock  of  the 
Tennessee  Coal  ^'iron  Co.  had  been  olTered  to  the  United  States 
Steel  Corporation.  I  will  not  say  authoritatively  or  by  the  owners 
exactly,  but  bv  people  who  assumed  to  be  acting  between,  or  acting 
for  the  Tenne.'^see  people.  Our  people  had  been  opposed  to  the  pur- 
chase of  the  property  at  any  price  or  on  any  basis,  and  had  dis- 
tinctly said  so.  Finally,  I  think  sometime  in  th-  early  part  of  1907  - 
not  iiitendiii-  to  be  accurate  as  to  dates— Mr.  Morgan  sent  for  me 
and  said  that  Mr.  George  Kessler  who,  as  you  know,  was  a  wine 
merchant,  but  who  had  purchased  some  of  this  stock  outside  of  the 
Schley  syndicate,  as  I  will  call  it,  had  ai^proached  him,  Mr.  Morgan, 
with  the  statement  that  the  stock  of  the  Tennessee  Coal  &  Iron  Co^ 
could  be  purcha>ed  at  about  i;,o,  and  asked  me  my  opinion,  i 
told  Mr.  Morgan  I  did  not  think  that  it  was  worth  half  of  that.  I 
did  not  think  we  could  afTord  to  take  it  at  any  such  price;  that  I 
would  like  to  bring  Mr.  Frick  over  to  the  bank  and  get  his  opinion. 
He  came  over  to  the  bank,  and  Mr.  Frick  expressed  about  the  same 
opinion.  The  matter  was  then  dropped.  1  l)elieve  Mr.  Morgan 
told  me  that  afterwards  he  found  out  that  Mr.  Kessler  represented 


AliSORPTIOX    OF    THE    Tl-,\NKSSEE    RaILROAD    CoMP.VNV      2S9 


iinly  himself,  and  did  not  rcpR'senl  the  other  people,  as  Mr.  Morgan 
h.ul  supposed. 

Alon<r  about  the  ::;(!  day  of  OcIoIht,  kjo;,  Mr.  .Morj^an  recjuested 
me  to  come  over  to  the  bank,  and  said  Mr.  Sehley  was  very  much  in 
need  of  money,  or  securities  winch  he  could  use  at  the  bank.  I 
think  I  saw  Mr.  Schley  at  the  bank  at  that  time;  if  not,  I  did  later; 
but  the  business  linally  resulted  in  my  accommodating  Mr.  Schley 
liv  loaning  him  Si. 200,000  par  value  of  our  second  bonds,  and 
taking  from  him  an  agreement  to  return  tlm^-i'  bonds;  and  1  re- 
f  ived  from  him,  as  security  for  the  fulfillment  of  his  agreement, 
-■.000,000,  par  value,  of  the  stock  of  the  'J'ennessee  Coal  &  Iron 

The  agreement  pr<nide<l.  as  I  remember,  that  if  the  $1,200,000 
par  value  of  bond-  \v(  re  not  returned  by  .\pril  2t,,  1908,  the  owner- 
ship of  the  82,000,000  par  value  of  the  stock  of  the  Ti'imessee 
Coal  &  Iron  Co.  should  be  and  remain  in  the  United  States  Steel 
Corporation.  That  was  done  as  an  accommodation  to  Mr.  Schley 
at  hi?  very  urgent  request  and  because  he  stated  it  was  ab-olulely 
iiece.ssary  to  ])rotect  him  from  financial  trouble.  That,  you  see, 
would  be  taking  the  Tennessee  Coal  \:  Irun  Co.  -tock  as  security  on 
tliel)asisof  60. 

Mr.  Littleton.  Pardon  nw.  do  you  know  how  nuuh  Mr.  Schley 
hadof  theTeiifiessee  CoaU*v  iron  Co.    lock  at  th.it  time.-' 

Mr.  Gary.  No;  1  do  not.  1  did  not  know  anything  about  it  at 
that  lime,  except  so  far  as  appeared  by  this  transaction.  I  have  here 
tlie  written  agretment  between  the  United  States  Steel  Corporation, 
'•i'.'ned  liy  myself  a<  chairman,  and  .Moore  &:  Schley  and  the  memlnrs 
lit  the  firm  of  Moore  &  Schley,  and  under  the  circumstances  and  in 
view  of  the  fact  that  he  lias  heretofore  appeared  before  a  ct)m- 
mittce  and  exposed  the  facts  in  regard  to  this  1  feel  justified  in 
giving  all  the  facts,  and  I  will  furni>h  the  cummiltee  a  cojjy  of  this 
.i:'reement. 

Mr.  Littleton.  Yes. 

.Mr.  Gary.  T  will  exhibit  it  now  to  the  committer,  and  I  wuuhl 
like  to  retain  this,  of  course,  but  will  be  glad  to  furni-h  you  with  a 

Mr.  Littleton.  We  will  be  very  glad  to  have  a  copy. 

Mr.  Gary.  The  next  thing  that  occurred  in  relation  to  this  pur- 
chase was  bout  the  2d  day  of  November.  IQ07.  We  were  then  in 
the  midst  of  what  I  haw  iermed  a  financial  cyclone.  There  were 
runs  on  many  banks  throughout  the  city  of  New  York,  including 


« 


^■-zm  i 


290 


InUUSTRIAT-   CoMniXATlOXS    AND    Frusts 


the  Tn!?t  Co.  ot  America,  the  Lincohi  Trust  Co.,  and  vcr>-  many 
other  .janks.  The  panic  had  extended  all  over  the  country,  more 
or  less.  Banks  in  Chiea;^o  had  drawn  their  money  from  the  New 
York  banks  so  far  as  they  could,  and  banks  in  other  cities  had  col- 
lected their  moneys.  It  was  impossible  for  depositors  to  ^et  out 
of  the  banks  throughout  the  country  the  money  they  had  in  the 
banks.  It  was  impossible  for  bu-iness  men  to  borrow  money. 
Loans  were  being  called  in  New  York,  Chicaf,'o,  .'^t.  Louis,  and  va- 
rious other  cities.  As  an  illustration,  a  president,  or  vice  president, 
of  one  of  the  trust  companies  in  New  York  called  me  on  the  phone 
to  sav  that  unless  the  hank  could  secure  S;, 000,000  in  credits  tli.it 
(lay  it  would  have  to  close  its  doors,  and  asked  me  to  help  if  I  could. 
1  api.lied  to  J.  P.  Mortran  &  Co.,  who  had  received  pledges  from 
various  bankers  there  to  furnish  certain  amount-  of  moneys  or 
credits,  for  assistance,  and  they  stated  th  t  they  had  so  many 
applications  and  had  so  much  business  ot  nis  kind  on  hand  that 
they  could  not  devote  any  time  or  attention  to  it,  and  askid  me  to 
and  out  if  this  Trust  Co.  was  entitled  to  any  relief,  and  I  a-ked  my 
own  people,  comptroller  and  assistant  treasurer,  to  go  to  that  l)ank 
and  make  an  examination  of  it.  I  think  they  spent  the  >vhole 
night  doing  so.  The  next  morning  1  reeei\ed  their  report  and  in 
turn  reported  to  J.  i'.  .Morgan  &  Co.  that  the  bank  had  securities 
enough  to  entitle  it  to  relief,  and  Si, 000,000  was  furnished,  and 
afterwards,  I  think,  a  good  deal  more.  The  bankers  of  our  city 
were  in  session  almost  night  and  day.  I  w.is  at  Mr.  Morgan's 
library  several  nights  nearly  all  night.  Many  of  the  leading  bankers 
of  our  city  were  there  nearly  all  night.  Tlnre  is  nodoubt  that  there 
was  every  indication  that  we  wore  in  the  throes  of  a  panic  which 
might  lead  to  the  most  disastrous  results,  including  the  suspension 
of  a  large  number  of  banks,  and  the  failure  of  a  great  many  dilTerent 
])eople.  To  one  who  could  see  this,  who  could  talk  wi.h  the  people 
and  talk  not  only  with  the  bankers  themselves  but  the  depositors 
and  i)eople  generally,  there  could  be  no  i)ossible  doubt  that  the 
country  was  in  very  grave  danger  of  one  of  the  worst  financial 
I'.anics  that  has  ever  been  witnessed  in  this  country.  I  have  not 
undertaken  to  describe  it,  or  do  any  more  than  refer  to  it.  Hut  at 
this  time.  I  sav,  Mr.  Morgan  telephoned  a  reriuest  to  me  to  come 
to  his  library,  and  I  went.  I  found  Mr.  Lewis  Cass  Ledyard.  and, 
I  think.  Mr.  Schley  was  with  him;  he  was  on  several  occasions, 
although  I  di<l  not  talk  with  Mr.  Schley  at  the  first  interview. 
Mr.  Ledyard  was  the  counsel  of  Mr.  I'aync. 


AiiSdKi'TKJX   OF  Tin:  Tknnesske  Raii.hoad  Company     j;;i 


Mr.  LiNDAiU'KY.  Oliver? 

Mr.  ( i AKV.  Oliver  rayne.  He  was  one  of  the  gentlemen  named  in 
what  ha.-^  been  taUe.l  the  "syndicate,"  w.iich  liad  jiun based  a  cim- 
troUinj:;  interest  in  the  Tennessee  Coal  &  Irdii  Cn.  That  syndieatc 
was  made  up  of  a  nv.r.ilii.    of  very  ri^h  [leujjle. 

Mr.  Littleton.  Ki,!;hl  on  that  head,  and  tiefore  ])rocccdinR 
further,  is  it  or  is  it  not  a  fact  that  Moore  &  Schley  h<ld  the  stock 
of  the  Tennessee  Coal  &  Inj!i  Co.  for  and  f.>n  behalf  of  a  syndicate 
of  gentlemen? 

Mr.  G\RV.  Amajority  of  the  stock. 

Mr.  Littleton.  A  m;:jority  of  it;  on  behalf  of  a  syndicate  of 
gentlemen  comprisinf^  Q.  H.  Payne,  who  had  10,300  shares;  L.  C. 
lianna,  who  had  10.  ^oo  shares;  j.  P.  Duke,  who  had  10,300  shares; 
v..  J.  HtrwiiHl,  who  had  10.300  shares;  J.  W.  Ciates,  who  had  10,300 
shares;  A.  N.  Brady,  who  had  the  same  amount;  (1.  .\.  Kessler,  who 
had  the  same  amount;  Oaklcicjh  Thorne,  who  had  the  same  amount; 
E.  W.  Oj^lebay,  who  had  5,150  shares;  H.  S.  Hlack,  who  had  5,150 
shares;  F.  D.  Stout,  who  had  5,150  shares;  J.  W.  Simpson,  who  had 
5,150  shares;  G.  \\ .  French,  who  had  ..',500  shares;  S.  G.  Cooj)er, 
who  had  1,500  shares:  ;iiid  J.  .\.  Toppin},',  who  had  1,000  shares? 

Mr.  Gary.  I  think  that  is  correct,  except  I  do  not  think  Kessler 
was  in  tlu'  orirjinal  syndicate.  I  think  he  l).)uf^ht  outside,  and 
Schley  lin.illy  to.jk  hi-  -tock  with  the  rest  and  made  some  advances 
iin  it. 

Mr.  Littleton.  With  that  riualilkation.  then,  the  situation  at 
th.it  juncture  was  that  Moore  &  SchK  y  held,  for  and  on  behalf  of 
thi'>e  f;entlemcn  who  comi)rised  the  <;yndicate,  i  iS,3oo  shares  of  the 
Tennessee  Coal  &  Iron  Co;  that  is  vour  under, standing? 

Mr.   Gary.   Yes. 

Mr.  Leptletc^n.  Now  you  may  tio  alnad. 

.Mr.  G\RY.  Mr.  Ledyard  -laird  tliit  Moore  &  Schiey  were  in 
very  great  financial  distre-s.  I  think  h  stated  it  perhaps  nmr,' 
>trMngly  than  Mr.  Schley  stated  it  when  he  ^va^  before  the  Judiciary 
C'limmittee  of  the  Senate,  although  I  read  that  statement  to-day, 
anil  1  noticed  that  Mr.  Schley  testiiied  that  he  was  in  great  fuian- 
cial  distress  at  that  time,  and  did  not  know  what  would  become  of 
him  unless  he  secured  help  by  the  sale  of  this  stock,  T  think  Mr, 
l.olyard  stated  that  Moore  &  Schley  were  largely  indebted  to 
y'r.  I'aync,  and  had  a  great  many  of  his  securities;  that  Moore  & 
Sihlcy  had  deposited  with  their  securities  on  an  indebtedne-s  aggre 
gating  more  than  $jo,ooo,ooo  a  large  umuunl  of  the  Ttnucsscc  Coal 


292 


TxDrsTRiAi.  CoMrnxATioxs  AND  Trusts 


niii.n 


\-  banks  in 


&  Iron  ^-tock  as  collateral  ^.Turily  in  a  very  f:reat 
New  York;  that  these  hanks  had  called  the-e  loans,  or  insisted 
upon  Moore  «S:  Schlev  taking  up  the  Tennessee  Coal  &  Iron  stock, 
for  the  reason  thai  it  v.a-  not  -alah'.e.  It  had  Ix'en  a  stock  that  over 
a  period  of  vear>  had  lieen  put  up  from  a  very  low  figure  to  a  very 
hi,i,'h  fifiurc,  beinf^  in  the  control  of  a  syndicate  which,  I  will  not  say 
manipulated  it— I  had  nothhi^  to  do  with  it— but  it  inlluenced  the 
greatest  fluctuations  in  it.    That  is  very  easily  ascertainable. 

i\lr.  Bartlf.tt.  Thev  had  thi-  -^loi,k  up  in  various  banks,  you 
say,  but  it  was  rath-r  a  fact,  wa>  it  not,  that  it  was  uj)  in  the  trust 
companv  of  which  Mr.  Oakkitjh  Thorne  was  president? 

Mr.  Garv.  He  had  about  four  hundred-odd  tliousand  of  them  up 
at  that  bank,  as  I  understand.  1  understood  from  Mr.  Ledyard 
that  Moore  &  Schley  had  loaned  to  their  customers  who  had  Ixni^ht 
this  stock  and  put  it  in,  sums  of  money,  and  then  they,  Moore  & 
Schley,  in  turn  had  i)ledf;ed  this  stock  with  the-e  bank- as  collateral 
security,  in  a  great  many  ■'■'"•"■  rent  lianks,  aggreRatinf,',  in  all,  about 
So.ooo.'ooo.     That  was  th  enunt  ar-  1  understood  it,  as  I  re- 

member  it.  . 

Mr.  Ledyard  s.iid  that,  in  h\-  opinion,  there  was  no  possible 
wav  of  prevent in;^  the  failure  of  .Moore  ^S;  Schley  unless  we  pur- 
chased thi«^  stock,  and  he  believed  if  Moore  &  Schley  failed  it  mean- 
the  failure  of  a  ureat  manv  bank-.  Mr.  Morgan  said  to  me,  'T 
do  not  know  v.hether  the  United  States  Steel  Corporation  can 
uftord  to  buv  this  stock  or  not;  I  will  expre--^  no  opirion  on  that 
subject.  But  I  will  say  that,  in  my  opinion,  if  it  (Iocs  not  buy  the 
stock,  or  unless  it  or  some  one  else  furnishes  relief  at  this  partic- 
ular time,  there  is  not  anv  man  on  earth  can  say  what  the  result 
will  be  in  the  financial  circles  of  this  country.  In  my  opmion,  the 
circumstances  make  the  conditions  very  critical,  and  if  you  can 
sec  your  way  clear  to  buv  this  stock,  there  is  no  doubt  it  will  help 
the  situation.  Now.  I  turn  Mr.  Ledyard  over  to  you  and  you  can 
take  up  and  consider  this  question  and  see  what,  if  anythnig.  you 
can  do."  I  said  to  Mr  Morgan.  "In  the  first  place,  1  would  not 
think  of  considering  the  purchase  of  this  stock  without  going  to 
Washington  first  and  taking  the  matter  up  with  the  President  or 
the  Department  of  Justice,  or  both."  He  said,  "Why?  Have 
thev  any  ri-jbt  to  say" whether  you  buy  or  not?"  I  said,  "No;  they 
have  no't.  Hut  here  is  a  financial  crisis,  and  from  your  standi)oint 
the  object  of  i)uving  this  stock  wouKl  be  to  allay  this  stor'ii,  t  ■ 
assist  in  cvcrconiing  this  panic,  and  if  the  Department  of  Justi> 


Ai!-^<'Ri'Ti(»N  (ir   iHi.  Tennessee  Railku.u)  Company     ^93 


(  r 


thi'  i'rcsident  should  find  out  wo  bad  purchased,  or  were  about  to 


l)urchase  it,  an 


d  sli 


ould  enjoin  us  from  purchasing  on  the  ^ro 


)und 


that  it  would  add  to  our  hcil(Hn,c;s  and  thereby  raise  the  (juestion  of 
creatine;  or  adthni:;  to  ;i  nioni)i)oly,  you  can  see  at  once  that  what  we 
had  done  would  be  to  make  the'hnancial  conditions  very  much 
)r?e  than  they  are  now;  and  therefore,  it  seems  to  me,  we  ou.uht 


\\i 


to  know  how  the  President  and  the  Department  of  Justice  wou 


feel  about  the  question. 


He  said,  "Well,  I  think  that  is  \er> 


forcible,  and  i  see  no  objection  to  your  Koinp;  over  there  if  you  teel 
like  it."  I  said.  "1  certainly  would  not  be  in  favor  of  considering 
this  without  goini:  nwr  thire/' 

I  then  telephoned  Mr.  Frick,  a  member  of  our  finance  committee. 
1  tliiiik  Mr.  Ream  and  some  others  were  out  of  the  city  that  day, 
althou},di  I  am  very  sure  Mr.  Ream  and  most,  if  not  all,  of  the 
iiiember>  of  the  committee  attended  subsetiuenl  days  when  we  held 
various  meetings  to  con>ider  these  questions.     I  telephoned  .Mr. 
Krick  and  asked  him  to  come  to  the  library,  which  he  did  imme- 
diately.    It  seems  to  me  it  was  early  in  the  morning,  and,  as  I  re- 
member, the  report  from  his  house  was  that  he  wa-  out  riding.    Hut 
I  left  word  for  him  to  come  to  the  library  as  .-oon  as  he  returned, 
and  he  did  so  within  a  comparatively  short  time.    He  came  to  the 
library,  and  I  stated  to  him  brietly  the  situation  and  asked  him  it 
we  should  consider  this  question,  if  he  would  go  with  me  to  Wash 
ington,  and  he  said  the  lirst  question  to  con-ider  wa-  whether  we 
wnuld  cf>nsider  the  purchase  of  this  property.     He  had  spokm 
against  this  a  good  many  times,  and  he  was  oppo-ed  to  it.     He  did 
not  think  he  wanted  topurchn^e  it.    He  made  the  Mannient  that 
he  did  not  think  it  was  worth  more  than  what  I  .-aitl  I  thought  it 
was  worth.     I  had  said  to  Mr.  Ledyard  that,  in  my  opinion,  the 
<tock  was  not  worth  over  65;  and  1  believe  Mr.  Lidyard  will  corrob 
(i.ite  that.     Mr.   Trick  expressed  about   the  >:ime  <ii)inion.     lb 
was  very  much  opposed  to  it,  and  not  until  alter  I  had  gone  over 
tiie  subject  with  him  carefullv.  and  he  had  approached  Mr.  Morgan 
,,iul  Mr.  Morgan  had  told  him— he  and  1  had  gone  t(,  Mr.  .Morgan'> 
ro.m— how  he  felt  about  the  panic,  did  he  give  any  encouragement 
v.li.itever  in  regard  to  his  oi)inion  and  his  influence.    Finally,  how- 
ever, he  said  he  would  like  to  think  it  over.     In  the  meantime,  1 
think.  I  had  telephoned  the  secretary  of  the  company  to  come  to 
the  library,  and  I  asked  him  to  telephone  the  memljcrs  of  the  tinance 
committee  and  secure  a  meeting  at  the  library  of  the  finance  com- 
mittee as  soon  us  {wssiblc,  and  they  came  there  very  soon.    This 


'# 

-1- 

• 

r     1 

• 

294 


Industrial  ('oiniiNAiKJNs  and  TiasTS 


whole  subject  matter  was  pone  over  wry  carefully  by  n-.c,  and  I 
tiiink  Mr.  Frick  olTered  the  resolution — I  wt)ul(l  like  to  tell  you 
what  resolution  was  passed  at  that  lir>t  meeting.  Remember,  it 
had  been  represented  that  Mr.  S'hley  had  on  deposit  as  collateral 
security  toward  the  payment  of  hi'^  loans  only  about  six  millions 
of  the  stock  of  the  Tennessee  Coal  &  Iron  Co.  I  think  he  said 
then  five  or  >ix  millions.  I  thought  the  resolution  on  its  face  stated 
what  we  decided  upon,  but  it  does  not;  it  provides  that  on  Novem- 
ber 3  the  whole  subject  matter  be  repm-tcd  to  the  chairman,  with 
power. 

But  it  was  understood  that  we  would  oiler  to  loan  Mr.  Schley 
either  five  or  six  million  dollars  in  cash,  taking  the  Tennessee  Coal 
&  Iron  Co.  stock  as  collateral  security  for  the  rejiayment  of  that 
loan;  and  if  that  faili'd  to  satisfy  hi>  wants,  that,  then,  we  would 
buy  the  stock  on  the  basis  of  paying  go  for  it  in  l)ond>  of  the  United 
States  Steel  Corporation,  i  went  back  to  Mr.  I.edyard  and  made  a 
proposition  to  make  this  loa".  to  Schley.  He  talked  with  Schley, 
and  made  answer  that  that  would  not  do  at  all;  they  could  not  get 
along  with  that;  that  Mr.  Payne  himself  had  offered  to  loan  Mr. 
Schley,  I  think,  a  million  dollars;  someone  else  had  otTered  to  loan 
a  million  dollars;  and  someone  else,  or  others,  a  million  dollars. 
."^o  that,  as  I  remember,  there  n-ere  aliout  S,^,ooo,ooo  additional, 
which  would  provide  in  cash  to  Moore  &:  SchU  y  about  eight  or  nine 
million  dollars.  But  that  Schley  said  that  would  not  do  at  all,  and 
he  could  not  possibly  get  through.  Mr.  Irick  himself,  then,  a>  I 
remember,  had  a  conversation  with  Schley  and  tried  to  urgr  him  to 
accept  this  loan,  saying  we  did  not  want  the  stock  and  did  not  be- 
lieve in  its  rcjjresented  value;  did  not  bt  Meve  it  was  worth  over  (jo 
or  65  at  the  outside.  Mr.  Schley  told  Mr.  Frick,  as  I  remember, 
that  he  could  not  get  al.jng  with  that  i>rin;  that  he  must  sell  this 
stock;  that  there  were  various  reasons  why  that  was  the  only  way 
he  could  fwssibly  keep  the  firm  frt)m  bankruptcy.  Mr.  Schley  was 
rejiresented  by  an  attorney,  Mr.  Thatchir,  of  Simjjson,  Barnum 
&  Thatcher,  who  was  his  counsel,  Mr.  Ledyard  representing  Mr. 
Payne,  but  trying  to  helji  Mr.  Schley  because  Mr.  Schley  ',va.->  in- 
indebted  to  Mr.  Payne;  and,  if  I  am  not  mistaken — I  would  not 
like  to  do  anybody  an  injustice — if  Mr.  Thatcher  should  be  sub- 
pa'nacd  and  would  have  the  right,  from  a  professional  standpoint, 
to  state  it — I  am  not  sure  about  that — I  believe  he  would  say 
that  an  assignment  had  been  prepared  for  cither  Moore  &  Schley 
or  Mr.  Schh  v. 


m<\ 


4 


Aim 'Ki' HON   of  thk  'ri;.\NL;ssi,i;   Railroad  CoMrAXY 


'95 


;ir.  LiNUAiiURV.  An  ussij^nmcnt  for  th.   benclit  of  creditors? 

Mr.  G \RV.  For  the  benetil  of  creditors. 

Mr.  l.ii  iLETox.  That  is,  Mr.  John  Thatcher? 

Mr.  Gary.     Mr.  Tom  Thatcher. 

Mr.  LiiTLKTUN.  Do  you  think  Mr.  Schley  would  permit  Mr. 
Thatcher  to  tell  that? 

Mr.  Gary.  That  I  do  not  know. 

Mr.  LiTii.ETOX.  Of  course  the  privilege  lies  with  Mr.  Schley. 

Mr.  Gary.  1  understand  Mr.  Schley  has  said  since — I  do  not 
know,  but  he  testified — that  he  could  have  got  through  this  panic 
all  right.  .\n\'b(jdy  who  say'  liim  at  that  time  and  heard  him  talk 
would  not  think  he  believed  he  could  get  through  at  that  time. 

Mr.  LixoAUURV.  I  want  to  say  that  Mr.  Schley  is  a  neighbor  of 
mine  in  the  country,  and  he  is  a  pretty  sick  man  just  now.  I  do  not 
believe  he  ought  to  be  approached  from  what  1  hear. 

Mr.  LiiTi.KTUN.  We  have  his  testimony  on  the  subject  in  another 
hearing. 

Mr.  Gary.  Thereupon  I  began  to  talk  to  Mr.  Lcdyard  about  the 
purchase  of  this  stock  on  the  l)asis  of  qo.  and,  as  I  remember,  he  and 
I  fmally  agreed,  subject  to  the  olijection  which  might  possibly  be 
made  in  Washington,  in  the  way  and  fr,r  the  reasons  1  have  hereto- 
fore suggested.  As  I  remember,  Mr.  Ledyard  or  Mr.  Schley,  rep- 
resented by  Mr.  Thatcher,  but  communicating  through  Mr.  L'^d- 
yard,  agreed  to  take  ()0  for  the  stock  and  take  his  pay  in  bonds. 

.Mr.  Littleton.  .1/  llnil  point  did  you  or  Mr.  Lcdyard  or  Mr. 
l hatcher  or  any  oj  yon  bclicir  that  the  President  or  Attorney  General 
had  any  right  to  indorse  this  transaction/ 

Mr.  Gary.  /  n-as  clearly  of  the  opinion  that  he  did  not,-  and  later 
1  will  be  very  glad  to  tell  you  how  that  (|uestion  came  up  and  what 
took  place,  because  1  feel  certain  now  that  every  one  connected  in 
any  way  will  agree  that  the  exact  facts  and  all  the  facts  should  be 
made  known,  and  I  do  not  know  that  there  has  ever  been  any  other 
opinion  held  by  anyone. 

I  have  stated  that  we  otTered,  under  the  conditions  and  subject  to 
the  conditions  mentioned,  tr  pay  for  this  stock  in  the  bonds  of  the 
United  States  Steel  Coqjoration.  They  were  then  (juoted  at  about 
^4,  which,  by  comparison  with  other  stocks  in  the  market,  was 
pretty  high,  notwithstanding  it  was  a  very  low  pri<  c  I'or  those  bonds, 
which  had  sold,  and  should  have  sold,  .md  did  soon  after  ^>ell,  for 
better  than  par.    Hut  they  were  considered  the  i)est  kind  of  security, 

'Thus  in  original — Ed.  -  Italics  arc  the  editor'^. 


i 


I. 


2g6 


Industrial  ("ombixations  and   TRrsrs 


and  they  were  more  salable,  in  my  opinion,  in  laro;e  amounts  than 
anything  else  on  the  market,  any  (jther  kind  of  bonds  or  stoclo, 
strange  as  it  may  seem.  There  was  a  great  market  for  those  bonds, 
and  after  this  trade  was  made  millions  and  millions  of  them  sold, 
commencing  at  about  S4  and  not  going  down  below  about  7S  or  7q,  a^ 
I  remember.  The  United  States  Steel  Corporation  interests  had, 
in  dilTerent  banks  scattered  throughout  the  country,  about  875,000,- 
000,  and  we  would  have  been  piea>ed  to  pay  for  this  stock  in  cash 
rather  than  jxiy  for  it  in  our  bunds  at  84,  except  for  the  fact  that 
we  could  not  do  that  without  disturl)ing  the  financial  conditions 
of  the  country,  disturbing  the  financial  conditions  of  these  banks, 
respectively,  where  our  money  was  de]X)sited.  I  was  receiving 
reciuests  from  Pittsburg  banks  to  withdraw  our  money  in  other 
localities  and  put  more  money  in  the  banks  of  Pittsburg;  also  the 
same  request  from  Chicago,  the  same  re(iuest  from  other  cities, 
and  recjuests  from  New  York  banks  to  bring  more  money  in  from 
other  cities  to  New  York,  as  that  was  the  seat  of  the  greatest  trouble, 
the  seat  of  the  whole  trouble,  I  was  afraid  to  di-turb  these  banking 
condition:",  and  relations  by  the  withdrawal  of  money. 

Mr.  Littleton.  How  much  would  ii  have  withdrawn,  about? 

Mr.  Gary.  It  would  have  wilhdrawr  twenty-five  or  more  million 
dollars.  We  could  not  have  withdrawn  from  any  l)ank  anywhere 
at  that  time  $5,000,000  without  creating  a  very  great  disturbance, 
the  I'mal  result  of  which  no  man  at  that  time  could  measuie  or 
possibly  form  any  adequate  notion  ol.  if  I  had  lieen  disposed  to 
take  advantage  of  the  linancial  conditions  to  make  money,  with 
this  large  depo>it  in  the  different  banks,  with  tliese  great  resources, 
I  could  have  bought  securities — that  is,  bomls  of  all  sorts  and  de- 
scriptions in  the  market,  which  had  gone  down  to  a  comparatively 
low  price,  'i'here  was  every  opportunity  for  anyone  who  hai! 
cash  resources  to  make  money.  lUit  certainly  there  was  no  such 
disposition  on  the  part  of  the  United  States  Steel  Corjjoration,  or 
anyone  connected  with  it,  and  therefore  we  proposed  to  pay  for 
the  Tennessee  Coal  &:  Iron  stock  in  t'  Ixinds  of  the  United  States 
Steel  Corporation,  which  were  in  our  treasury,  and  which  were  as 
good  as  cash — which  could  be  sold  in  the  market  and  which  would 
be  received  by  any  of  the  banks  as  collateral  security  in  the  pla  e 
of  the  Tennessee  Coal  &  Iron  stock  or  any  other  stock. 

I  say  that  Mr.  Ledyard  and  I  agreec'  upon  the  price  of  go.  Hi 
came  back  to  me.  it  seems  to  me,  the  next  day— some  time  subse- 
quently— and  said  he  was  told  by  Mr.  Schley  and  his  counsel  thai 


Aii 


I'Tiox  OF  THE  Tkn'xp:ssi:i:  Rau.kmad  ('i>.mi'\xy 


-97 


till;  [iricc  of  90  would  not  possi])ly  let  Mt's>r>.  Moore  &  Schley,  or 
Mr.  Schley  oul;  they  could  iu)t  ^ct  alon^  with  that.  1  notice,  in 
rc.diii.L;  the  testimony  of  Mr.  (iates,  thai  he  says  he  },'ot  home  and 
he  made  them  raise  the  purchase  price  of  securities.  JJut  the  whole 
transaction  was  closed  before  Mr.  Gates's  return  from  Europe — 
hi'fore  he  arrived  in  Xew  York,  and  if  he  made  that  statement  he 
iiui-t  h.i\e  made  it  by  Marconi,  and  certainly  it  wa:-  not  communi- 
cated to  us.  The  reason  given  to  us,  and  the  only  reason,  for  pro- 
posing to  increase  the  purchase  price  was  that  the  stock  at  go 
was  not  sufllcient  to  allow  the  hrm  of  Moore  &  Schley  to  pull 
through. 

I  went  back  to  our  finance  committee  and  represented  those 
facts,  and  we  had  another  meeting  on  November  4  and  anotl.er 
resolution  was  passed,  again  referring  the  whole  subject  matter 
to  the  chairman  with  power;  and  1  returned  to  Mr.  Ledyard  and 
a;;reed  to  raise  the  price  from  ()0  to  100  in  order  to  allow  .Moore 
i\;  Schley  to  pull  through.  ^ly  bargaining  was  all  with  Mr.  Ledyard ; 
the  negotiations  were  entirely  betv/een  Mr.  Ledyard  and  me,  as 
1  remember.  Mr.  Morgan  certainly  did  not  participate  in  any 
respect  nor  attempt  to  inlluence  anybody  to  buy  or  .-cH.  1  do  not 
hold  any  brief  for  Mr.  Morgan,  but  I  meniion  that  in  connection 
v.iih  some  of  the  published  and  sensational  statements  which  have 
undoubtedly  been  based  on  misinformation. 

Mr.  Gardner.  I  would  ju-t  like  to  understand.  Your  tirst 
.igreemcnt  was  to  buy  the  stock  at  yo  per  cent  of  its  face  value — 
the  .-eci  'ities? 

Mr.  Gary.  'Ves;  and  i)ay  for  it  in  bonds  at  S4. 

Mr.  Gardnkr.  And  pay  for  it  in  Ijonds  at  >S4;  that  is  to  say,  you 
paid  S72  on  the  hundred? 

Mr.  Gary.  I  ha\-e  not  made  the  figuns;  but  afterwards  I  agreed 
to  pay  par  for  the  Tennessee  stock  in  bonds  at  84.  That,  in  other 
words,  would  l)e  paying  about  119  for  the  Tennessee  stock,  on  the 
assumption  that  the  bonds  were  worth  par. 

Mr.  Gardn'-r.  In  other  words,  you  paid  out  SS40  for  S900  worth 
of  their  securities,  or  did  you  pay  Si 00? 

Mr.  G  .."Y,  .S840  for  a  thousand,  par  value,  o^  their  securities  was 
the  final  trade. 

Mr.  Gardner.  That  is  what  I  want  to  get  at. 

Mr.  Gary.  Xo;  it  is  tlie  other  way.    I  was  mistaken. 

.\lr.  Gardner.  What  I  v.ant  to  get  at  is  this:  Were  you  going  to 
pay  them  Sioo  for  S 100  worth  of  their  securities,  only  you  happened 


I; 


l*BJ 


298 


IxursTRiAL  Cdmuinations  anu  Tri'sts 


to  settle,  for  convcnicnct-,  in  b(jncU  at  S4,  or  were  you  goinj^  to  pay 
§84  for  Sioo  worth  ol  .-rcurilies? 

Mr.  Gary.  Your  I'lr-t  >tatem(.'nt  is  ri<;ht. 

Mr.  Gardner.  Thiii  let  me  a.-k  you,  ju>t  to  clear  my  own  mind 
on  the  subject — because  1  have  only  <:one  on  the  committee  to-day- 
you  said  that  Col.  Payne  olTered  to  lend  a  milliim  dolhirs  uriuinally? 

Mr.  Gary.  I  was  so  informed.  You  ii;el  all  tlio^e  fad-  I'rom  Coni- 
mod-jre  Ledyard. 

Mr.  G.\KIJ-\KR.  I  want  to  fnllow  you;  that  did  not  ^how,  ap- 
parently, as  a  drop  in  the  bucket;  that  that  was  followed  by  a 
proposition  from  you  to  lend  .So.ooo.ooo,  or  thereabouts.-' 

Mr.  G.XRY.  They  all  came  in  louether.  Commodnre  Ledyard 
said  Mr.  Payne  would  i)rovide  a  million  dollars,  and  other  i)artie>, 
I  remember,  about  two  millions  more,  and  then  we  offered  to  add 
to  that  a  loan  of  live  or  six  million  dollars. 

Mr.  Gardner.  In  addition  to  the  three? 

Mr.  Gary.  Yes,  sir. 

Mr.  Gardner.  That  brings  it  up  to  nine  millions? 

Mr.  Gary.  Ei^ht  or  nine  millions. 

Mr.  G.vrdner.  But  that  would  not  let  Messrs.  Moore  &  Schley 
out  of  their  difTiculty.  Then,  the  next  y)roposition,  as  I  under- 
stand, was  90  per  cent  of  the  face  value  of  their  securities;  that  was 
$25,000,000,  or  thereabouts? 

Mr.  Gary.  I  think  so. 

Mr.  G.\RDNER.  And  that  would  not  let  Moore  &  Schley  out  of 
their  tlitficulties? 

Mr.  G.vry.    That  is  rif:;ht. 

Mr.  Gardner.  Finally  you  paid  over  S.^o.oocooo,  and  that  did 
not  let  them  out.  Now,  what  I  want  to  j^et  at  is.  What  were  Moore 
&  Schley's  obligations  that  required  such  an  enormous  dilYerence 
as  between  the  original  imipositinn  of  Col.  Payne  and  what  linally 
was  furnished? 

Mr.  G.\ry.  These  obligations  which  were  ])aid  for  by  the  United 
States  Steel  Corporation  were  not  all  the  obligations  of  Moore  &: 
Schley.  They  ditl  have  obligations  in  the  bank,  as  I  understood, 
of  between  thirty  and  forty  million  dollars. 

Mr.  Gardner.  Thirty  or  forty  millions  of  dollars  was  about  thf 
selling  price  of  the  securitie>? 

Mr.  G.ary.  They  Imd  borrowed  thirty  or  forty. 

Mr.  G.VRDNER.  Hut  they  had  a'jrainst  that  the  Tennessee  Coal  & 
Iron  stock,  which  wa.,  worth  somelhing? 


Ai3S()Ki'ri()\  OK   riiK  Tk-Wksski;   Railroad  Compaxy 


-'99 


Mf.  C.  \KV.  And  various  "ther  stocks.  I  do  not  know  Uu'  details 
<il  tho^t!  loans.  But  here  is  a  thin^  I  would  like  to  ha\c  you  <,'c-t 
in  your  mind;  it  is  important:  Most  of  the  gentlemen  wlio  wtTc 
[)articipants  in  this  syndicate,  so-called,  who  were  wealthy  men — 
many  of  them,  at  least — were  not  oblij^ated  at  all  on  the  Moore  & 
Schley  loans;  but,  as  I  under>tood  it,  and  as  I  believed  from  their 
acts  at  the  time,  they  were  very  glad  to  turn  in  their  stock,  which 
they  owned  at  thesi'  prices  which  were  agreed  ui)on.  Hut  JLi.--t  how 
much  of  the  bonds  which  we  turned  o\er  were  needed  by  Moore  & 
Schley  to  take  care  of  themselves  we  were  never  informed. 

Mr.  Garhnkr.  Here  is  what  I  want  to  get  at.  You  said  vou  and 
Mr.  Frick  decided  that  the  stock  was  worth  from  Oo  to  O5,  in  your 
()pini(;n. 

Mr.  G.\RY.  Not  more  than  that. 

Mr.  Gardner.  That  is  all  you  cared  to  pay  for  it,  ordinarily? 

Mr.  Gary.  Yes. 

.Mr.  Gardner.  But  on  account  of  Mr.  Morgan's  representation 
to  you  that  if  Moore  &  Schley  failed  it  would  be  followed  by  a 
tinancial  panic  whose  size  could  not  be  measured,  you  linallv  gave 
them  100  for  that  which  you  thought,  only  as  a  business  venture 
taken  by  itself,  to  be  worth  only  Sd^;  in  other  words,  that  vou 
came  to  the  rescue  of  Moore  &  Schley  to  the  extent  of  over 
S  S^-oocooo? 

Mr.  Gary.  Xot  o\Tr  30,000,000. 

Mr.  Gardxir.  Why  not? 

Mr.  Gary.  You  mean  the  total? 

Mr.  Gardner.  You  gave  them  in  bonds,  which  were  convertible 
into  cash,  somewhere  from  79  to  84  of  its  face  \alue;  you  gave  them 
S;,o,ooo,ooo.  That  is,  what  they  could  use  as  cash.  That  is  what  I 
want  to  get  into  my  mind,  whether  that  great  amount  of  money 
uas  necessary  to  avert  this  calamity  which  was  im[)endiiig,  in  view 
of  the  fact  that  a  large  number  of  holders  in  the  pool  of  Moore  & 
Schley  were  men  whose  interest  it  was  obviously  to  ^hare  with  you 
that  cost  of  averting  a  panic? 

Mr.  Gary.  I  do  not  know  the  figures  with  resiK'ct  to  the  indebted- 
ness of  Moore  &  Schley,  which  was  secured  by  this  stock;  nor  do  I 
know  how  many  other  members  of  the  syndicate  owed  anrl  had  ]>ut 
up  that  stock.  Mr.  Schley,  in  his  testimony,  refers  to  the  fact  that  a 
C'lod  deal  of  it  was  up.  I  do  not  know  how  much,  and  we  never 
had  those  figures.  What  \\'e  did  know,  or  what  we  were  informed, 
was  that  eight  or  nine  million  dollars  was  not  sufficient,  and  we 


300 


iNUrSlKIAl,    ('n.MiUXATIDNS    AND   TRUSTS 


were  al:^<)  lold  lli.il  there  was  no  way  of  preventing  this  failure  except 
by  the  pur(lui.-.e  of  the  whc)le  of  the  block. 
'  Mr.  G AKDNi.K.  Al  loo  i)er  cent? 

Mr.  Gary.  At  loo  per  cent.  Now,  I  suspect  that  members  of 
that  syndicate  who  were  not  in  debt  said  to  SehUy:  "We  have  put 
this  stock  in  your  liand^  with  an  aKreemenl  thai  it  ~h;il|  not  be 
sold  In-  vou  unless  sold  al  a  prot'it.  and  it  has  cost  us  about  no"'— 
1  think  Schley  said  it  stood  him  in  at  that— "and  we  will  not  allow 
you  to  sell  your  interest  in  that  syndicate  unless  at  the  same  time 
you  put  ours  in  at  the  same  ])rice  and  give  us  a  chance."  That  i> 
what  I  suspect;  1  do  not  know  that.  But  1  do  know  those  w-rr 
rich  men,  some  of  them. 

Mr.  Gardnkr.  Vou  found  a  situation  in  which  Mr.  Morg:i:i 
said:  "I  do  not  know  whether  >-ou  can  buy  this  or  whether  you  can 
buy  that,  but  here  is  the  fact,  unless  Tsloore  &  Schley  have  the 
mcmcy  they  say  they  must  iiave"— which  ultimately  turn.-,  oul  to  l,e 
$30,000,000,  or  its  eciuivalent— "they  are  going  to  the  wall,  which 
means  general  ruin."  Ordinarily  a  man  would  say  to  himself: 
"Of  course,  it  will  ruin  the  United  States  Steel  Corporation  as  well 
as  it  will  other  people  if  there  is  a  panic,  and  are  there  not  some 
people  around  who  can  share  this  loss  we  are  going  to  stanrl  in, 
because  we  arc  paying  100  for  that  which,  we  think  is  worth  only 
05?"  You  would  naturally  have  looked  around  to  see  if  :here  was 
not  somebody  wlio  had  to  pay  his  share  to  pull  Moore  &  Schley 
out  of  the  hole.  Was  there  somebody  else,  or  did  the  wliole  burden 
come  on  liie  v     ircd  Stau->.  Steel  Corporation? 

Mr.  G\RV.  It  dill  linaily,  and  would  under  ai...  circumstance?, 
e.Kcept  to  the  extent  of  about  83,000,000.  as  I  understand. 

Mr.  Gardnkr.  Some  of  those  names  there  that  were  read  otT  a^- 
holding  10,^00  shares  seem  to  me  like  persons  with  whom  Mr.  Mor- 
gan should  have  influence. 

Mr.  Gary.  Which  one.  for  instance? 

Mr.  Gardnkr.  Oakleigh  Thorne. 

Mr.  Gary.  I  do  not  think  he  would  have  very  much  influence. 
What  other  one?  There  may  be  some  one  on  there,  but  1  do  nut 
think  there  was  anyore  there  that  Mr.  Mor<,^an  would  have  a  i)ar 
ticular  influence  over. 

The  Chairman.  Mr.  John  W.  Gates^    jLaughter.l    In  that  mn 
nection.  Judge,  while  they  are  waiting,  are  you  willing  to-day  tn 
dis]io~e  of  that  projjerty  {or  what  you  paid  for  it? 

.Mr.  G.vrv.  That  is  a  very  pertinent  question,  and  1  would  like  to 


I 


Absorption  of  thf.  Tknnf.ssek  Rmi.komj  ("nMPWV    301 


answer  that  in  ju-t  a  minutL'.  I  ju  •!  ',v;int  to  add,  iu  answer  \o  Mr. 
Gard'ier's  fiucslion,  this  suLjRcstion.  iii-  has  spoken  ot"  Mr.  Morgan 
making  these  representations.  There  were  several  other  leadir.f^ 
hankers,  whose  names  I  do  ni)t  now  remember,  ail  of  whom  were 
very  much  excited,  and  who  made  the  .same  representations;  that 
is,  the  representations  which  Mr.  Morgan  made,  as  1  understood, 
were  that  if  Moore  &  Schley  failed,  and  these  loans,  therefore,  in 
these  various  hanks  were  j)ut  in  a  position  where  the  clearitig  house 
could  not  aj)prove  them,  then  he  could  not  answer  for  the  results. 
That  was  the  statement,  and  Mr.  Morgan  said.  '"Xow,  Mr.  Ledyu^d 
tells  me  that  unless  this  stock  is  i)urchased  Moore  &  Schhy  must 
tail.  That  is  his  opinion,  and  he  has  no  doubt  .dxnit  ii.  I'liose 
are  the  facts." 

.Mr.  Garuni;r.  What  I  was  trying  to  gel  at  was,  why  you  did  not 
have  any  [lartners  in  misery. 

Mr.  Gary.  I  presume  you  have  been  in  trouble  before,  when  you 
have  seen  a  large  portion  of  the  people  surrounding  the  trouble  run 
in  all  directions.  Mr.  Morgan  is  the  one  man  who,  on  such  occasions, 
will  rise  to  the  occasion  and  put  his  own  money  into  the  other  banks 
i>r  on  the  stock  exchange  or  anywhere  to  prevent  the  panic  or  pre- 
vent trouble,  and  give  the  use  of  his  name  and  his  credit  to  help 
people  who  are  in  financial  distress.  lie  has  done  it  o\-er  and  over 
afain,  and  on  this  occasion  no  doubt  he  ri-^ked  many,  many  miliim 
dollars  of  his  own  money  in  order  to  try  to  avert  the  panic.  But 
that  is  not  true  of  all  others.  It  is  true,  though,  that  on  this  occasion 
many  of  the  leading  bankers  of  Xew  York  gathered  around  Mr.  'Nh^r- 
gan,  an('  wi'h  him  became  responsible  for  large  sums  of  money. 
They  were  all  obligated  in  many  directions  and  in  large  sums,  and 
these  bankers  believed  from  the  representations  which  had  been 
made  to  them  that  the  United  States  Steel  Corporation — or,  at 
1 'a^t,  they  hoped — could  atTord  to  buy  this  stock  and  help  out 
liir  situation  and  luially  recoup  itself  against  loss.  So  that  it  may 
r.^.i  be  true,  and  I  have  not  said  that  as  a  final  result  the  United 
>'ates  Steel  Coqioration  made  a  lieavy  loss.  I  would  be  glad  to 
give  you  my  opinion. 

Mr.  Gardnfr.  We  do  not  expect  you  to  make  a  loss,  because 
\.h.o  panic  was  terminated.  But  naturally  you  took  your  risk  of  a 
!'.-.  What  I  want  to  get  through  my  mind  is.  why  j'ou  had  alone 
to  make  a  present  to  Moore  &  Schley — and  that  is  what  you  did 
in  paying  100  for  that  of  which  the  market  value  was  only  70  per 
cc-ii— why  you  alone  had  to  stand  in  the  way  of  that  thunderstorm. 


3°- 


InUOTKIAI.    ("OMHI.NAl'IUNS    AM)    TlUSTS 


Mr.  Gary.  Because  there  was  no  other  customer  for  that  stock; 
because  if  that  stock  had  been  put  on  the  market  the  price,  before 
it  had  been  sold,  would  have  gone  down  very  much  below  65,  in 
mv  opinion.  I  believe  that  comi)any  would  have  been  in  bank- 
ruptcy in  a  very  short  time  if  it  had  not  had  help. 

Mr.  Gardnek.  Suppose  you  had  adhered  to  your  orij^inal  ofTer  of 
go? 

Mr.  Gary.  Then,  perhaps,  we  would  nut  have  gotten  the  stock. 
Perhaps  Moore  &  Schley  would  have  made  an  a.ssignment  and 
precipitated  all  this  trouble.  If  it  was  true,  as  represented,  that 
the  00  would  not  let  him  out 

Mr.  Gardner.  How  would  he  l)e  better  olT  by  making  an  assign- 
ment? 

Mr.  Gary.  He  wnulii  imt  l)e  any  better  off;  but  tlu-  financial 
conditions  would  be  very  much  worse  itiT. 

Mr.  Garum.r.  But  I  was  thinking,  what  could  his  possible 
motive  be  in  refusing  that  oiler? 

Mr.  Gary.  He  could  not  get  through. 

Mr.  Gardnkr.  If  he  would  have  to  take  less  in  the  long  run? 

Mr.  Gary.  If  he  would  have  had  to.  If  he  was  going  to  fail,  he 
might  as  well  fail  for  an  old  sheep  as  a  lamb. 

Mr.  Gardner.  lie  might  as  well  pull  other  people  down  with 
him? 

Mr.  Gary.  I  .suppose  there  are  still  some  Sampsons  in  the  world. 
T  do  not  know  whether  he  might  be  of  that  disposition. 

Mr.  LiNDAiU'RV.  He  probably  could  not  get  his  stock  out  of 
"hock." 

Mr.  Gardmr.  That  is  very  likely.  I  want  to  get  clearly  in  my 
mind  why  it  w,  .  that  the  I'nited  States  Steel  Corporation  paid 
100  finally  for  that  which  you  had  determined  was  worth  only  As. 
and  that  you  alone  were  the  peoplr  doing  it.  I  can  perfectly  under- 
stand th.it  if  you  were  the  only  people  who  would  do  it,  it  might 
pay  you  very  well  to  do  it. 

Kir.  Gary.  That  is  the  answer. 

Mr.  Gardnkr.  That  you  had  exhausted  all  ottur  p<>^sil)ilities? 

Mr.  Gary.  That  i>  the  answer. 

Mr.  LiTTLKTON.  Will  you  take  up  the  thread  of  your  slmy  where 
you  had  it  a  moment  ago? 

Mr,  G\RY.  Very  well. 

Mr.  Ki  rTi.KTf)N.  You  agrecMl  to  pay  100. 

Mr.  Gary.  I  think  that  was  Sunday  night.    We  hud  a  meetin  • 


Absorption  of  tuk  Tennessee  Railroad  Company     303 

(ti  the-  finance  committee  as  late  as  1 1  o'clock,  and  maybe  12  o'clock, 
Sunday  night. 

Mr.  YoiNC.  Had  you  seen  the  President  previous  to  that? 

Mr.  Gary.  Xo.  I  think  it  was  about  10  o'clock  when  I  called  up 
the  private  .secretary  of  the  President  and  asked  him  to  make  an 
apointment  for  Mr.  Prick  and  me  to  meet  the  President  at  the 
earliest  practicable  hour  the  ne.xt  morning.  He  got  in  comnmnica- 
tiun  with  the  President  and  said  the  President  would  see  us  at  10 
o'clock  Monday  nior'.;ing,  as  I  remember  it.  We  lit  Id  a  meeting  of 
the  fmance  committee  very  late  that  night,  and  immediately  after- 
ward Mr.  I'rick  and  I  secured  a  special — an  engine  and  a  car — and 
went  to  Washington.  We  might  have  sUirted  later,  considerably 
later,  l)ut  we  arrived  in  Washington,  I  think,  a!)out  S  o'clock,  or  if 
we  arrived  earlier  we  did  not  get  up  before  abt)ut  >S  o'clock.  I  sug- 
gested to  Mr.  Prick  that,  notwithstanding  our  appointment  at  10 
o'clock,  we  had  better  go  to  the  olTice  of  tin-  President  and  endeavor 
to  see  the  President  before  10  o'clock.  Mr.  Morgan  had  said  the 
conditions  in  New  York  were  so  critical  he  would  like  to  know  the 
opinion  of  .Mr.  Frick  and  myself  at  the  very  earliest  moment.  We 
went  to  ihe  otlico  of  the  Presitlent  and  saw  his  secretary  there,  1 
think,  at  about  g  o'clock.  1  will  not  undertake  to  be  >trictly  ac- 
curate as  to  the  hour,  Ijut  I  think  it  was  about  9  o'clock  that  we 
arrived  at  the  oflice  of  the  secretary.  1  brielly  stated  our  business, 
and  the  secretary  said  the  President  was  at  breakfast;  it  was  not  his 
custom  to  come  to  his  otTue  before  10  o'clock — I  understood  that 
was  his  rule — and  he  was  not  accustomed  to  seeing  anyone  until 
after  he  had  had  .1  chance  to  look  at  his  mail.  I  asked  him  if  he 
would  go  to  the  President  where  he  was  breakfasting  and  say  to 
hmi  that  Mr.  Frick  and  I  were  nere;  that  we  considered  it  very 
important  to  see  him  immediately,  and  ask  him  if  he  would  make  an 
exception.  He  returned  with  the  President,  and  the  President  said 
at  once,  after  hearing  the  story,  that  he  would  like  to  consult  the 
Department  of  Justice.  I  think  Mr.  l^onaparte  \,as  out  of  the  city. 
The  President  then  directed  that  Secretary  Root  be  requested  to 
come  to  the  ofTicc  of  the  President  immediately.  I  am  not  sure 
whether  this  intervi  'w  was  in  the  oflici  or  one  of  the  rooms  in  the 
White  House.  That  is  not  important,  of  course;  I  may  be  mi'^takcn 
about  that;  I  nther  think  it  was  in  the  White  House.  But,  wher- 
ever we  were,  t  le  President  rerjuested  .Mr.  RcK)t  to  come  to  where 
tlu'  Presiden'  was  immediately.  Mr.  Ro>it  appeared  very  soon 
alter.    Tne  President   tlnii  a-kid  me  U>  again  .slate  the  case  in 


^,04  Industrial  Combinations  and  Trusts 

Mr  Roofs  presence,  which  I  did.  The  rcsulL  of  that  int.  view  1 1.,.^ 
mediately  telephoned  lo  New  York.  The  secretary  to  th  1  reside;., 
had  kepi  Ihe  telephone  open. 

Mr.  Littleton.  Did  the  Proident  a.k  Mr.  Root  his  opinion  on 

thisciuestion? 

Mr.  Gary.  He  did. 

Mr  Linii  TON".  .\s  to  the  validity  and  legality  ol  Ihi.,.'' 

Mr  G\KV  He  did.  Tliere  was  no  disagreement  between  us. 
Now  Rcnllemen  of  the  committee,  I  have  a  record  ol  the  substance 
of  what  took  place  on  that  occasion,  and  I  see  no  reason  lor  not 
giving  it  to  this  committee. 

Mr  LiTTLLTON.  We  would  like  very  much  to  have  It. 

Mr.  G.\RV.  1  have  never  been  reque>ted  nut  to  give  it  to  the  com- 
mittee nor  re»iuested  to  treat  it  as  conudential. 

Mr  Young.  When  was  this  record  made  up,  Mr.  Gary. 

Mr  G  VRY  1  will  give  you  the  dales.  On  November  7,  1907,  two 
days  after  Mr.  Frick  and  1  visited  the  White  House,  I  wrote  to 
Secretary  Root  as  foHows:  xovkmukr  7.  ..07. 

My  Dixr  Mk.  Sichkt.ary:  Al  the  rixcnl  interview  ai  the  White  llouscf>e- 

tween    he  Pre^dent.  vourself,  Mr.  ITi.k,  a.-d  myself,  1  slated,  in  substance 

ha    our  ton^.ration  hud  the  „p|K,rt unity  of  acc.u.rmu  more  than  one-half  of 

he  e."pita   Jtoek  of  (he  Tennessee  Coal.  Iron  &  kadroa.l  Co.  at  a  pr^e  son  e- 

v.h..  ;n  ,.vr..«  of  whil  we  believed  to  be   ts  real  value,  and  that  il  had  lK.en 

lur  s'".l'      .1  a    i    ll  e     ur  ha.e  should  be  ma.le  il  would  be  of  Kr.at  beneUt 

r^lineld  ^;illlions.  'and  would,  probably  sasx  fn>m  ^uK.e  -  -P--; 
business  coneern;  that  under  the  cin  utnstances  Mr.  iTuk  and  I  had  dcudui 
?o  avor  the  ,.r  H.<e<l  pun  hasc  of  stock  unle.ss  the  I'residcnt  objected  to  the 
^.me  I  Ker  state]  that  the  total  pr-nluetive  capaeily  of  our  .;.mpan.« 
S  not  be  materially  imrea.se<l  by  the  ownership  of  the  properties  ol  the 
Tennes^r  Co.,  uul.  after  the  purchase,  would  p_robal,ly  not  an.mml  to  mor 
th  m  00  u.r  ee  ,1  of  the  total  steel  production  i.t  ti.i.^  eounuy,  which  was  ab  .u 

Se  ,.cr.  n  a«e  .  f  our  .omnanies  a't  the  time  of  the  or.anizal.0,1  of  the  Ln.  d 
S  al^  Steel  Corporation;  tlat  our  policy  was  opposed  to  socurin«  'Y'-;;;:^,^^  ,1 
our  lines  or  even  a  material  increase  o.  our  rel.ime  ;{l'^'\'\>  '  '  ""^V;'!^"' 
the  President  lo  sav  that  while  he  would  not  and  could  not  leu-.  li\  make  an> 

n.l  n«  iron  i  e  or'a^reement  he  did  not  hesitate  to  say  from  all  the  crcum- 
'l.mcesL  presented  he  certainly  would  not  advise  against  the  proposed  pur- 

'''lfo,nsi>tent  will  vou  kindly  write  me  if  the  above  statement  is  in  accordance 
with  your  understanding' and  recollection?  ^.^^^ 

Sim erely,  yours,  E-.  n.     • 

Mr.  Root  responded  as  follows: 

'  XOVKMBI  R    II.    IfjO,. 

Mv  l>.^K   Mr.  (;  xry:  I  have  your  letter  ..f^^.ve.t1bc•r  7.    It  fully  a«ree*^^^^^^^ 
my  recollcclioa  of  the  interviesv  to  which  you  re.er.  m  which  you  .laled  to  thr 


Absorption  of  the  Tennessee  Raili:  '  u)  Company     305 


FVesidcnt  the  circumstances  under  which  the  L'nited  Stales  Steel  Corporation 
li,i(l  hccn  asked  to  rehcve  the  financial  situation  by  purchasing;  a  majority  of 
the  stock  of  the  Tennessee  '"  '  Iron  &  Railroad  Co.  I  have  sent  a  copy  of 
>our  letter,  with  this  answt.  m  the  President,  with  a  recommendation  that  it 
Le  transmitted  to  the  Deparlmtnt  of  Justice  for  tiling  there. 

Very  sincerely,  yours,  Kuuu'  Rout. 

I  received  anuth(r  k-ttcr  from  Mr.  Root,  as  lollows: 

XrtVKir    ,R  20,  IQ07. 
Dkak   .Mk.  (i akv:  I  indose  a  copy  of  a  letter  wliicli  I  have  sent  to  the  Presi- 
dent inclosing;  a  coi)y  of  your  letter  of  November  7,  and  a  copy  of  the  Pre>ident's 
answer.    You  have  a  complete  copy  of  what  you  will  be  able  to  lind  upon  the 
tiles  of  the  l)c[)artment  of  Justice  if  any  occasion  arises. 

Very  sincerely,  yours,  Ij.uiu  Rout. 

Inclosed  wrrc  the  t'nliowinf;  co|)ii's.  I'lr-t.  from  Mr.  Root  lo  the 
Trcsidenl,  dated  \o\ember  11,  1907: 

1)F.  \R  Mr.  Presidknt:  I  transmit  herewith  a  copy  of  a  letter  from  .Mr.  L.  H. 
(i.iry.  president  of  the  L'nited  Stales  Steel  CoqKjration,  dated  Xovemlier  7, 
i()07,  received  by  me  on  the  following  day.  You  will  perceive  that  it  relates  to 
the  interview  which  .Mr.  (Jary  had  with  you  last  week  repardinK  the  purchase 
by  his  company  of  the  capital  stock  of  the  Tennessee  Coal,  Iron  &  Railroad 
(11.  I  send  also  a  cop_\'  of  my  answer  to  Mr.  Cary,  and  recommend  that  these 
p.ipcrs  be  sent  to  the  Uei)artment  of  Ju-,tice  and  plated  ujion  the  liles  of  that 
licpartment. 

Very  truly,  yours,  Kliiiu  Root. 

.\  letter  fioi.:  the  President  to  the  Secretary  of  State: 

XovKMBER  ig,  lyo;. 
My  De.\R  Mr.  Sk.cretary:  I  am  In  receipt  of  your  letter  of  the  nth  instant 
ami  inclosures,  and  have  forwarded  them  to  the  .Atlorney  (leneral  to  be  |)laced 
<>n  the  tiles  of  the  Department  of  Just'  e,  to;;elher  with  a  copy  of  this  letter. 
.\Ir.  (iary  states  the  facts  as  I  remcml      ihcin. 

\  ery  truly,  yours,  I'ulodore  Roosevelt. 

-Mr.  Littleton.  Is  there  any  adihtional  fact,  outside  of  that 
(iintem[)oraneous  record,  which  yoti  ninrmlicr,  Judge  Gary,  of  the 
events  of  that  visit? 

Mr.  Gary.  I  remember  M)me  of  the  conversation.  I  rememhcr 
tile  Secretary  of  State  sayinj,'  to  the  President  tliat  of  course  he  hail 
nil  rii;ht  to  say  that  we  could  Iniy  this  property.  Tlie  Presidint  said 
In-  understood  that.  He  thought  ail  we  wished  to  I<now  was  wh.it 
w.RiM  be  the  disposition  of  the  President  and  tlie  l)ei)artmcnt  of 
Justice  in  case  we  did  buy,  for  the  reason  tltat  if  there  was  an  (»bjcc- 
ti"M  liy  the  Government  we  would  not  accomplish  the  desired  result. 

1  ri-mem!)er  the  President  sayinj:  he  was  plad  to  know  that  the 
percentage  in  production  of  the  -tecl  of  this  country  of  the  United 


■S:'. 


3o6 


Inuustrial  (omiunatidns     XI)  Trusts 


States  Steel  Ci  ation  was  not  greater  and  was  even  less  than  it 
was  at  the  tim  of  the  organization  of  the  company;  that  he  fell, 
as  1  knew,  that  the  (juestion  of  monopolies  in  this  country  wa^  a 
very  serious  one,  but  he  said: 

In  view  of  the  fact  tiiat  your  percentage  has  not  increased,  hul  h.\''-  (iecreased, 
and  the  further  lai  t  that  all  of  us  ha\e  an  appreciation  of  tlie  liuancial  condi- 
tions in  \e\v  York,  I  do  not  believe  that  anyone  could  justly  criticize  me  for 
saying  that  I  would  not  feel  like  objeLtini;  to  the  [jur(ha>L  under  the  circum- 
stances. 

Xow,  I  know  it  i-  he'.ieved  by  the  chairman  of  tliis  committee, 
from  statements  which  he  has  made,  that  Mr.  Frick  and  I  misrep- 
resented the  facts  to  the  President.  Oi"  course  I  regret  that  very 
much,  and  I  am  going  to  try  to  >!iow  to  the  committee,  if  I  am 
permitted 

The  Chairman  linterjjosing).  That  you  possit^ly  misled  him 
unintentionally? 

Mr.  Gary.  Of  course  I  would  not  intentionally  misrepresent  your 
statement. 

The  Chairman.  The  chairman  did  not  mean  to  make  that  state- 
ment cjuite  that  bald. 

Mr.  Carv.  I  want  to  satisfy  the  chairman  and  the  committee,  if 
I  can,  by  the  facts  and  figures,  that  we  did  not  make  any  misrepre- 
sentation. I  belie\e  everyone  connected  with  the  United  States 
Steel  Corporation  cares  inorc  for  his  conduct  and  his  reputation  and 
his  character  than  he  does  in  regard  to  the  question  )f  making  or 
losing  a  few  dollars.  I  want  to  satisfy  you  of  that,  if  1  can,  bv  the 
facts  and  figures,  which  are  undi>puted. 

The  Chairman.  Since  the  gentleman  ha<  been  free  to  mention  the 
attitude  of  the  chairman  in  the  matter.  I  would  like  to  say  tnat  the 
chairman  is  now  sitting  in  a  judicial  capacity,  notwithstanding  the 
fact  that  he  was  the  proponent  of  the  resolution.  The  chairman 
will  say  to  the  gentleman  that  after  a  careful  investigation  of  such 
information  as  was  obtainable,  such  inform.ition  being  the  sworn 
testimony  and  statement  before  the  Committee  on  the  Judiciary 
in  the  Senate  of  the  United  States,  his  opinions  in  that  matter  were 
l)redicated  upon  (hat  sworn  testimony  as  to  the  facts.  His  opinions 
as  to  the  law  were  predicated  u|)on  such  jtoor  auth(.rity,  if  the 
gi'ntleman  sodeein^  it.  as  the  opinions  cif  Senator  Culbe-son.  Senator 
Foraker.  Senator  Hacon,  and  the  other  jurists,  who  until  this  time 
1  considered  quite  able  men.  who  expressed  themselves  in  terms 
equally  as  explicit  as  the  ( hairman  of  this  committee.    The  chair- 


Absorption  of   rni:  Tennessee  Railroad  Company     ,^07 


nuiii  regarded  the  ul)sorption  oi  the  company,  al  thai  time  a  com- 
l)eting  company,  by  the  tacit  apiiroval  of  the  President,  with 
i.vnuine  grid"  and  profound  astonishment. 

Mr.  Gary.  I  have  always  regretted  that  the  full  facts  in  regard  to 
the  acquisition  of  the  stock  of  the  Tennessee  Coal  &  Iron  Co.  were 
not  "developed  before  the  Judiciary  Committee  of  the  Senate,  to 
w  hich  you  have  referred . 

Mr.  Littleton.  The  only  witne.--es  who  testified  on  that  occ-  .ion 
were  Schley,  Thorne,  Perkins,  and  Herbert  Knox  Smith,  so  far  as 
the  record  shows.  Did  you  see  the  corre^jiondence  from  the  Presi- 
dent to  the  Attorney  Ceneral  that  followed  your  visit.-' 

Mr.  Gary.  1  have  scci  that  many  times,  yes,  sir;  1  saw  it  pub- 
lished. 

Mr.  Littleton.  I  think  it  should  go  into  the  record  at  this  time — 
the  complete  correspondence. 

(The  letter  from  the  President  to  the  Attorney  General,  referred 

to  by  Mr.  Littleton,  follows:) 

The  WiHTE  House, 
l\'i3.shi>ii^lon,  Xoi'f'Hbfr  4.  igoy. 
Mv  Dear  Mr.  .\ttornf.y  Gen-ERAL:  Judcc  K.  II.  Clary  ami  Mr.  II.  H.  Trick, 
on  la-luilf  of  the  steel  corporation,  have  ju>t  called  on  me.  They  slale  that  there 
is  a  certain  business  lirm  (the  name  of  vvliich  I  have  not  been  told,  but  which 
is  of  real  imi)ortance  in  New  York  business  circles)  which  will  undoubtedly 
fail  this  week  if  help  is  not  fiiven.  .Xmons;  its  assets  arc  a  majority  of  the  se- 
curities of  the  Tennessee  t'oal  Co.  .Xiiplication  has  been  ur>;ently  made  to 
the  steel  corjwration  to  purchase  this  stock  as  the  only  means  ol  aM)idin^  a 
failure.  Judue  Cary  and  .Mr.  I'rick  inform  me  that  as  a  mere  business  trans- 
action thev  do  not  care  to  purchase  t'^c  stock,  and  under  ordinary  circum- 
>t,inces  they  would  not  consider  purchasinR  the  stock  because  but  little  benehl 
will  come  to  the  steel  corfKiration  from  the  purchase;  that  they  are  aware  that 
the  purchase  will  be  used  as  a  ha, vile  for  attack  upon  them  on  the  ground  that 
they  are  striving  to  secure  a  mono[ioly  of  the  business  and  prevent  competi- 
tion—not thai  this  would  represent  what  could  be  honestly  said,  but  what 
mii.'hl  be  recklessly  and  untruthfully  said.  They  further  inform  me  that  as  a 
matter  of  fact  the'[-K)licy  of  the  company  has  been  to  decline  to  acciuire  more 
than  ^o  per  cent  of  the  steel  prop<Tties.  and  that  this  purp<ise  has  been  per 
severed  in  for  several  years  past,  with  the  .)bject  of  preventing  these  .iccu.sa- 
tions,  and,  as  a  matter  of  fact,  their  proixmion  of  steel  proiK-rties  has  slightly 
decreased,  so  that  it  is  below  this  60  |kt  cent,  and  the  acquisition  of  the  prop- 
(Ttv  in  question  will  not  raise  it  al)ove  60  |kt  cent.  But  they  feel  that  it  is 
immensely  to  their  interest,  as  to  the  interest  of  every  responsible  business 
man,  to  try  to  prevent  a  panic  and  gt  neral  industrial  smash  up  at  this  lime,  and 
that  they  are  willing  to  go  into  this  transaction,  which  they  wouhl  not  other- 
wise go  into,  becau.sc  it  seems  the  opinion  of  those  best  fitted  to  express  judg- 
ment in  New  York  that  it  will  Ik-  an  im|x)rtant  factor  in  preventing  a  break 
thii  might  be  ruinous;  and  that  this  h.is  been  urged  upon  them  by  the  com 
bination  of  the  most  responsible  bankers  in  New  York  who  are  now  thus  cii- 


HC 
.ft. 


3o8 


Industrl\l  Combixaiioxs  axd  Tri-sts 


gaged  in  endeavoring  to  save  the  silualion.  But  they  asserted  they  did  not 
wish  to  do  this  if  I  slated  it  ought  not  to  be  done.  I  answered  that  while  of 
course  I  could  not  advise  them  to  take  the  action  proposed,  I  fell  it  no  public 
duly  of  mine  to  interpose  any  objection. 

Sincerely,  \ours,  Theodore  Roosevelt. 

Hon.    CH.\RLES   J.    IklNAPARTE, 

Attonicy  General. 

Mr.  Littleton.  Did  you  or  Mr.  Frick  toll  the  President  what 
company  was  tt)  lie  saved  from  failure? 

Mr.  G.\RV.  I  believe  not;  I  think  not. 

Mr.  LiTTLKTON.  On  the  (]ucstion  of  the  ^<alvation  of  the  company 
from  failure  let  me  ask  this  question:  Moore  &  Schley  could  not 
have  failed  for  a  lar^e  amount  of  money  unless  the  loans  which 
they  had  in  the  banks  were  called,  could  they?    It  is  not  likely? 

Mr.  G.\RV.  I  would  not  say  that  it  was  likely;  of  course,  I  do 
not  know. 

Mr.  Littleton.  Did  anyliody  ascertain  the  number  and  amounts 
of  the  loans  which  they  had  in  the  banks  at  that  time? 

Mr.  G.\RY.  We  entleavored  to  verify  the  statement  of  Moore  & 
Schley.  I  sent  two  representatives  U>  their  books  whc;  made  an 
examination.  I  have  attempted  since  1  was  subpanaed  to  come 
before  this  committee  to  pet  the  result  of  that  e.xamination.  One 
of  the  }Tentlemen.  and  the  one  who  was  best  informed  in  regard 
to  the  result.  I  could  not  tlnd.  I  have  for<^ottcn  his  name,  but  it  is 
not  material.  He  has,  I  think,  left  the  city.  I  could  not  Tind  him. 
Mr.  Joyce,  the  other  one,  has  only  a  general  recollection.  He  says 
that  he  remembers  he  reported  to  me  that  their  loans  were  very 
lar;je,  and  that  the  securities  were  distributed  throughout  the 
different  banks. 

Of  course  you  know  how  the  bu.^iness  of  a  broker  is  done.  Hi' 
buys  stock  for  his  client,  and  his  client  may  deposit  a  margin  in 
cash,  and  he  takes  the  stock  and  goes  to  a  bank  and  borrows  money 
on  the  stock  and  puts  that  up  as  collateral. 

Mr.  Littleton.  Only  a  pledge? 

Mr.  Ci AKV.  Only  a  nleilge. 

Mr.  Littleton.  In  order  to  make  this  transaction  justifiable 
in  the  aftervicw,  whatever  might  have  been  the  fore\icw  of  it  at 
that  time,  //  was  easy  for  yon  to  have  been  deceived,  unless  you  ac- 
tually kitnv  the  amount  of  money  which  Moore  is"  Schley  owed,  as 
to  the  dire  necessity  of  f)urchasinf^  this  property^ 

Mr.  Ci.NRY.  /  would  think  so.  I  think  we  were  deceived,  whcllicr 
intentionally  or  otherwise,  in  this  respect.     I  believed  at  that  time. 


AliSOKPTlO.V    OF    THK 


Texxessee  Railroad  Comiaxy    300 


although  I  presume  it  teas  not  so  represented.  tlicA  Moor--  i-  Sehlcy 
had  a  very  muelt  larger  amount  of  the  Tennessee  Coal  o"  Iron  stoeh 
as  eoUalenil  than  I  no'd'  belirie,  after  seeing  this  syndieak  arrange- 
ment, they  had  aetually  deposited,  unless  the  stoeks  of  many  of  these 
rich  men  nerc  deposited  on  aeeount  of  indebtedness  by  the  members 
of  this  syndicate  to  Moore  iS"  S  hlcy. 

Mr.  LiTTLKTc^N.  Do  you  thi  k  the  syndicate  -was  enlarged  uhen 
the  prospect  of  the  sale  of  the  sto  k  brightened^ 

Mr.  Gary.  /  do  not  knoie  that  it  was  at  that  time.  I  have  an  op'n- 
ion,  not  justified  by  evidence,  that  when  that  syndicate  was  formed 
and  that  stock  purchased  there  was  a  hope  on  the  part  of  some  that 
the  stock  could  be  sold  to  the  United  .States  Steel  Corporation.  I  would 
not  tike  to  do  anyone  an  injustice.    That  may  not  he  true. ' 

Mr.  LiTTLKTON.  When  you  wnU  lo  the  President  and  nul  him 
and  the  Secretary  of  State,  knowini^,  as  you  have  stated,  that  it'  it 
were  a  violation  of  the  law  no  absolution  could  be  given  by  them,  it 
amounted,  did  it  not,  to  your  obtaining  the  opinion  of  the  President 
and  Secretary  of  State  as  to  whether  it  was  a  violation  of  law? 

.Mr.  GVA\.  1  do  not  know  that  I  would  ([uite  assent  to  that 
(.pinion.  1  did  reach  the  conclusion  that  if  we  acquired  those 
securities  and  there  should  afterwards  l)e  any  proceetling  of  any  sort 
on  behalf  of  the  Government  against  us  to  set  aside  or  i)revent  the 
consummation  of  that  purcha.>e  or  do  anything  else  it  would  be  a 
great  outrage. 

Mr.  Littleton.  .\nd  if  any  subsefiunit  jiroceedings  were  taken 
against  the  comp.my  after  this  purchase  were  made  under  the>e 
circumstances  the  company  would  have  rather  a  strong  defense, 
would  it  not,  in  stating  its  position  to  the  Government? 

Mr.  Gary.  I  would  think  so,  if  Mr.  Martin  Littleton  was  defend- 
ing th'-    ase  with  his  al)ility  to  expros  hinir-ilf. 

Mr.  Littleton.  That  is  ver}-  compliment  try.  Judge,  and  I  appre- 
ciate it. 

I  notice  in  the  letter  of  Mr.  Bonaparte  the  f<ill('wing: 

On  Xowmljer  4,  1907,  the  President  ;ul<lrcs>cH  to  mc  a  letter  of  wliiih  1 
i.ido-ie  a  cony.  .\t  the  time  of  the  visit  to  him  hv  Messrs.  Eriek  and  (;ar>-,  to 
"hieh  refereme  is  made  in  thi~  letter,  I  wa>^  absent  from  Wa^hinc'on,  Lut 
..Iter  the  letter  had  been  written  and  before  it  reached  me  I  had  a  brief  eon- 
\trsation  wiiii  the  President  in  which  I  was  informed,  in  substance,  of  the 
■:>l^  staled  more  in  detail  in  the  iiitcr  itself.  In  this  eonvers;ition  I  .idvised 
i):e  President  that,  so  far  as  tlie  Dep.irtment  of  Justice  was  informed,  no  rea- 
-   1  existed  to  believe  that  the  United  States  Steel  Corporation  or  its  oiliccrs, 

'  .\11  t  he  preceding  italics  arc  the  editor's. 


m 


3IO 


IXDL'STRIAL    COMBINATIONS    ANU     TruSTS 


directors,  or  stockholders  were  subject  to  prosecution  or  civil  action  under 
the  Siiermaa  antitrust  law,  and  that,  supposing  sucli  to  be  the  tact,  the  informa- 
tion con\eyed  to  him  by  Messrs.  Trick  and  Gary  tlid  not  materially  alter  the 
existing  situation. 

Were  you  familiar  with  that  letter? 

-Mr.  fixKY.  Xt);  I  was  not.  That  is  from  the  Attorney  General  to 
the  President? 

Mr.  LiTTLETdN.  I  am  wrong  about  that.  It  is  a  quotation  by  the 
.Attorney  (leneral  front  another  letter  of  his  which  was  written  to 
the  President,  and  this  is  contained  in  a  letter  to  the  chairman  of 
the  Judiciary  Committee  of  the  United  States  Senate. 

]\Ir.  Gary.  I  never  had  any  knowledge  or  information. 

Mr.  Littleton'.  He  says: 

I  added  the  statement  in  substance  tliat,  in  my  opinion,  based  upon  certain 
decisions  of  the  .Supreme  Court,  and  e>perially  the  knight  ca.se  (150  U.  S..  11, 
the  transaction  said  i)y  Messrs.  Gary  and  Frick  to  be  in  contemplation  would 
not  in  itself  constitute  an  offense  against  the  said  law  or  furnish  grounds  for 
action  by  the  Go\'ernment  to  enjoin  its  consummation;  but  if  this  transaction 
had  l)een  preceded  or  should  be  followed  by  a  series  of  others  of  like  nature  a 
materially  different  situation  would  be  presenlcd  and  the  case  would  become, 
in  some  measure,  analogous  to  tho.-e  of  the  Standard  Oil  Co.  and  the  Tobacro 
Trust  and  other  combinations  of  the  like  nature.  In  the  same  conversation 
the  I'resident  asked  my  (^pinion  as  to  the  IcRa!  correctness  of  the  attitude  he 
(the  President)  had  assumed  in  his  con\crs.tion  with  the  Renilemen  in  ques- 
tion, that  attitude  being,  in  substance,  that  while  he  had  no  right  to  advise 
them  to  take  the  cour.se  they  propo.sed  or  make  any  suggestion  to  them  in  the 
premises,  he  was  not  called  upon  to  interpose  any  objection,  and  I  re[)lied  that, 
in  my  opinion,  such  course  by  the  President  was  strictly  appropriate  under  tin 
law. 

Judge  Gary,  if  you  have  had  time  enough  to  consider  it,  do  you 
understand  him  to  mean  if  it  h.id  been  preceded  by  a  similar  trans- 
action or  followed  by  a  similar  transaction? 

Mr.  LiND.ABfRV.  Once  again,  apologizing  for  making  an  objc:- 
tion,  might  I  suggest  that  Judge  Ciary's  imerpretation  of  Mr.  Bona- 
parte's letter  to  the  President  would  hardly  be  proper? 

Mr.  Littlet(;n.  We  have  such  abundant  power  to  overrule  the 
obj'ection  that  I  will  withdraw  the  fiuestion. 

Mr.  G.\RV.  I  do  not  think  I  ([uite  tlnished  the  statement  in 
regard  to  the  e.\amin;'tion  of  the  purchase  of  these  securities, 
although  I  have  nearly  done  so. 

I  returned  to  New  York,  and  wc  entered  an  agreement  for  the 
purchase  of  the  stock,  or  the  profH'rties  through  the  stock,  in  the 
meantime  having  made  as  careful  ,ind  fall  ..n  txamination  as  we 


.S(;RPTION    OF    THE    TENNESSEE    R^MLROAD    COMPANY      J 1 1 


Jtia 


v'juld  in  regard  to  the  properties,  such  examination  having  com- 
menced almost  from  the  very  beginninii;  of  the  negotiations  or  the 
ni|uest  to  purchase. 

I  remember  that  Mr.  Gates  says  in  his  testimony  that  he  insisted 
that  the  board  of  directors  pass  a  resohilion  that  the  minority  stock- 
holders should  havt  the  right  to  turn  in  their  >t<H;k  at  the  same  price. 
He  may  have  insisted  upon  that.  I  have  no  recollection  of  his  hav- 
ing done  so.  If  he  did,  it  would  seem  to  me  as  rather  forcing  us  to 
buy  stock  instead  of  forcing  them  to  sell  ^tock,  but,  be  that  as  it 
may,  the  original  memorandum  of  agreement  provitled  that  we 
would  take  the  minority  stock  at  the  same  price.  That  agreement 
was  consummated  before  Mr.  Gates  returned  from  abroad — before 
hu  landed  in  this  country — and  so  I  am  inclined  to  think  that  he  is 
mi-laken  about  that,  so  far  as  I  am  concerni'd. 

1  would  like  at  the  proper  time,  and  as  you  may  desire,  to  state 
to  you  some  "f  the  values  of  these  properties  and  the  conditions  of 
I  ills  company. 


CH AFTER  XII 
TRUST   METHODS 

NOT1-: 

A  DISPROPORTlON.v.Ll.v  larL;r  -hari'  of  space  in  this  volume  has  been 
devoted  to  readiiiii^  on  the  above  subject.  The  editor  lias  felt  that 
this  is  a  most  vital  cjuestion.  It  bears  directly  on  the  issue  between 
Competition  and  Combination.  It  is  the  theory  of  the  editor  that 
the  advantages  of  combination  are  to  be  found  chiefly  in  certain 
methods  and  not  in  the  fre(|uently  allej^ed  economies  of  saving  of 
cross  freights,  saving  in  advertising  ai  in  salesmen,  suju'rior 
managerial  ability,  etc.  etc.  it  is  a  very  serious  question  whether, 
should  certain  practices  be  prevented,  the  alleged  natural  tendency 
to  combination  would  not  vanish  intt)  thin  air. 

The  exhibits  given  need  no  comment.  They  are  made  up  of 
excerpts  drawn  from  Government  investigations  and  from  the 
briefs,  petitions,  indictments  and  other  documents  in  the  various 
suits  brought  by  the  (Government  uniler  the  Sherman  Act.  I'or 
the  purpose  of  alTording  greater  convenience  of  study  they  have 
})een  .-subdivided  into  a  series  of  groups  each  under  a  particular 
heading. — Ed, 

GROLT  I 

EviiiniT  I 


(  oMr.wv 


.  I 


The  Government  alleges  that: 

In  September,  kuo,  defendants,  in  pursuance  of  their  genenil 
purpose,  through  Com])any,  of  New  Jersey,  ac- 
quired   the  business  of  G.  ,  who   was   engaged   in   the 

manufacture  of   machines   designated    and    adapted   for   use   in 

performing  all  the  i)rintipal  operation. -  in  the  nianufactuvo  of  

and    —  which  can  l)e  pi'rUimied  by  thu  aid  and  use  of  machinery. 


'  United  Slates  of  America  v. 


Court  of  the  L'nilcci  Suics  for  the  DLstrict  of  • 

3" 


-  Co.     Petition,  In  the 
-,  pp.  6O-70. 


Trust  Methods 


313 


For  at  least  two  years  immediately  preceding  Scptcnihtr,  lyio, 
•■^^'d  — -  had  invented,  and  had  taken  out  letters  patent  of  the 
I'nited  States  and  of  forci-^n  countries  covering  the  same,  machines 
designed  and  adapted  for  performing  all  the  principal  operations  in 

the  manufacture  of and  .    Among  suvh  machines,  vvliicii 

are  too  numerous  to  be  referred  to  specifically  in  this  petition,  were 

machines, machines,  and machines, 

-  machines, machines,  and  many  others.    On  or  about 

May  I,  1910,  the  said  — —  installed  in  the  -^—  factory  of G. 

^  Company,  a  corporation  of  Xew  Jersey,  issued  capital 
-,i-750>ooo-  \\'ith  its  factory  and  principal  ofliccs  at  Boston,  Mass., 

with  a  daily  capacity  of  17,000 of .  a  complete  set  of  thJ 

machines  so  owned  and  controlled  by  him,  the  said being  the 

owner  or  in  control  of  a  majority  of  the  capital  stock  of  the 

Company.     For  several  years  prior  to  the  installation  and  use  in 

the  lactory  of  the Company  of  the  machines  owned  and  ron 

trolled  by^ G. ,  defendants,  through Com 

p;;ny.  of  Xew  Jersey,  or  some  one  or  more  of  the  corporations  owned 
and  controlled  jjy  them,  had  furnished  and  supplied  all  of  the  prin- 
cipal machines  used  in  the  factory  of  the  Company  in  the 

manufacture  of and .  Upon  the  installation  in  said  fac- 
tory of  the  machines  owned  and  controlled  by  the  officials 

of  the  Company  caused  the  machines  owned  and  controlled  by 
delendants  to  be  dismantled  and  removed  and  discontinued  the 
payment  of  royalties  on  the  same. 
Thereupon  defendants  inslitu'ed  proceedings  against 


Lompany  in  the  Supreme  Judicial  Court  of  Massachusetts, 

in  which Comjiany,  of  New  Jersev.  was  the  i)art>- 

plamtitT,  to  enjoin  the  Company  from  using  the  machines 

winch  had  been  supplied  to  it  by G. ;  to  enjoin  said  

from  supplying  or  furnishing  to  the Companv  other  machines 

U)  i)e  used  in  the  place  of  machines  owned  and  controlled  h\  defend- 
iuits,  and  to  recover  rents  ami  royalties  on  defendants'  machines 

during  the  period  that "s  machines  had  been  used  in  the  factory 

of  the Comjxiny.    This  proceeding  was  never  prosecuted  to  ;: 

linal  determination  for  the  reasons  hereinafter  stated. 

G.  — —  had  advertised  extensively,  through  the  jiublic  pre>.i 
and  <)therwise,  for  several  months  prior  to  September,  igio,  the 
machines  which  he  had  invented  for  um'  in  the  manufacture  of 

•  and  ,  and  had  solicited  anK;";  — --  manufacturers  in 

various  parts  of  the  United  States  orders  for  the  sale  and  lease  oi 


3^4 


I.vDUSTRiAL  Combinations  and  Trusts 


Company,  St.  Louis,  Mo.; 


.St.  Louis,  Mo.: 

pany,   St.  Louis,  ^lo.; 


■  Company,  St.  Louis.  Mo. : 


&  Company,  Chicago,  111. ;  and 


Com[)any,  Chicago 


& 


such  machines.    ,  h(;\VLVLT,  experienced  difficulty  in  obtainmi,' 

orders  for  his  machines  on  account  of  the  arbitrary,  oppressive-! 
unreasonable,  and  unlawful  k-ise  and  license  agreements,  containing 

exclusive-use  and   provisions,   hereinbefore  mentioned  and 

described,  which  defendants  had  theretofore  required  and 

manufacturers  to  sign,  in  order  to  obtain  machines  from  defend- 
ants, and  under  which  such  manufacturers  then  held  all  of  the 

essential  machines  necessary  in  the  manufacture  of and  . 

However,  a  concerted  elTort  was  made  by  a  number  of  j^rominent 

and^ manufacturer.-,  engaged  in  business  in  various  States 

of  the  United  States  to  acnuire  the  inventions  and  machines  owned 

and  controlled  by -,  or  an  interest  therein.    .Xmong  such 

and manufacturers  who  were  so  interested  were , & 

Company, 

Com- 

111.: , 

Company, 
Boston,  Mass. 

Representatives  of  the  above  companies  on  September  22,  1910, 

were  in  Boston,  ]\Liss.,  in  conference  with  G.  with  a 

view  to  either  purchasing  an  interest  in  his  inventions  and  machines 
or  to  make  some  arrangement  v  ^ieh  would  enable  them  to  obtain 
machines  for  use  in  their  facto. les,  and  thereby  be  relieved  from 
the  domination  and  control  of  defendants.     Defendants,  being 

advised  of  the  purpose  and  intent  of  said and manufac'^ 

turers,  and  well  knowing  that  if  any  arrangement  were  made  be- 
tween themand G. whereby  the\-  could  obtain  for  use  in 

their  factories  machines  not  owned  and  controlled  by  defendants, 
such  action  would  result  in  defendants'  machines  being  dismantled 

and  removed,  as  had  been  done  in  the  factory  of  the Company, 

and  that  competition  would  be  created  in  the  sale,  lease,  and  use 
of  such  machines,  defendants,  for  the  purpose  of  preventing  such 
competition  and  to  monopolize  trade  and  commerce  in machin- 
ery, on  or  about  September  2;^,  iqio,  entered  into  agreements 

with  said  whereby  they  accjuired  all  the  inventions,  letters 

I-atent  of  the  United  States  and  of  all  foreign  countries  relating 
thereto,    together   with   all    machinery,    mechanisms,    tools,   and 

devices  owned  and  controlled  liy  said  .  designed  and  adapted 

for  use  in  tiie  manufacture  of  and ;  and  defendant,-- 

acfjuired  also  the  holdings  oi  the  cajntal  stock,  which  constituted 
a  majority  thereof,  which  the  said  owned  and  controlled  in 


Trx'ST  r\ii:Tn()Ds 


315 


said 


G. 


G. 


Company.     The  issued  capital  stock  of  said 


-  Company  is  ?.5, 750,000,  of  whicli  defendants  acquired 
82,250,000.  For  the  inventions,  imi)rovements,  letters  i)atent  of 
the  United  States  and  foreign  countries,  machine.:.,  machinery, 
mechanisms,  and  devices  designed  and  used  in  the  manufacture  of 

and  ,  including  the  82,250,000  of  capital  stock  of  said 

G. Company,  defendants  paid G. S6,ooo,ooo, 

part  in  cash  and  part  in  stock  of  defendant  coqiorations. 

For  the  [)urpose  of  maintaining  their  monopoly,  defendants  re- 
quired and  took  from  said  covenants,  in  substance,  that  he 

>h()ul(l  a>sign,  transfer,  set  over,  and  deliver  to  defendants  ail  inven- 
tions, im[)rovements.  letters  patent  of  the  United  States  and  of 
foreign  countries,  applications  for  letters  ])atent,  an,!  interest  and 
rights  therein,  which  he  might  make,  own,  or  acquire,  within  15 

yiar>  thereafter,  relating  to  the  manufacture  of  and  ~ — , 

(ir  to  machinery,  mechanisms,  tools,  or  devices,  processes,  methods, 

iir  things  intended  or  adapted  for  use  in  the  manufacture  of , 

ur  in  the  working  or  manipulation  of  leather,  or  relating  to or 

of  any  description  whatsoever,  or  to  the  manufacture 

'hereof,  together  with  any  and  all  rights  which  the  said miglit, 

within  said  period,  by  agreement  or  otherwise,  acquire  or  take 
over,  covering  any  such  inventions,  improvements,  letters  patent 
of  the  United  States  and  of  other  countries,  applications  for  letters 
[)atent.  and  interest  and  rights  therein. 


Exhibit  2 


COMPANY ' 


The  Government  alleges  that: 


In  December,  1002 


I. 


and  certain  other  persons  were 


engaged  in  the  ])romotion  of  a  coiporation  which  tliey  intended 

should  erect  a factory  at  Menominee,  Michigan,  and 

manufacture  ,  and  were  engaged  in  making  contracts 

\\;lh  farmers  for to  be  delivered  to  said  company;  and 

tiny  intended  that  said  company  should  engage  inde{)endently  in 

interstate  trade  and  commerce  in -.    The  — 

("umpany,    to    prevent    this   proposed    competition,    entered    into 

'  United  Slates  of  Amrrica  v. Company  and  others.     Origi- 
nal I'etition,  In  the  ■  Court  of  the  United  Stales  tor  the  — —  Distrirt  of 

,  pp.  iii-ii-'. 


a'51 


,i6 


IxOrSlklAl,    (■()\!r.IXATK)\S    AM)    TKrSTS 


ncgfitlations  wilh  sakl  which  resulted  in  ils  Mibscrihiiif:;  f(ir 

30,000  shares  of  the  capital  stocli  of  said  proposed  company,  a;id 

in  December,  1002,  The (\jm|)any, I. , 

and 15. cau>ed  defendant O-.npany  to  \)v 

incurporateti,  and  thereupon  'Vhv Company  pur- 
chased ,^0,000  shares  of  its  capital  -tock,  v.  iiith  it  has  held  and 
voted  ever  .-incc,  and  throuj^di  such  ;  tock  ha-,  in  conjunction  with 
baid ,  duuiinated  and  controlled  said  com[)any. 


KxiiiniT  I 


,1 


GENERAL    Kl.r.crRIC   COMrANY 
The  Government  alleges  that: 

On  February  10,  i(io6,  and  thereafter,  from  time  to  time,  con- 
tracts were  entered  into  between  the  -Sienien.s  &  Halske  Aktien;,'t- 
sellschaft,  of  Berlin,  Germany,  as  vendor,  and  defiridants,  Gei.  ral 
Electri(  Company  and  National  Klcctric  l.ani()  Conii)any,  !>  the 
lamp  companies,  whi'rel)y  ^^aid  defendant  lamp  comi)anits  acquired 
the  exclusive  ri,L,dit  iu  manufacture,  use,  and  -'.II  throi.L'iiout  tlic 
United  States,  its  territories,  possession-,  ai'd  depcndencii-. 
'"tantalum  filament"  incandescent  electric  lanip-  (exciudin<;  the 
maiuUa(  ture  of  I'llamcnl^  therefor)  under  the  initcnts,  api)lications, 
and  inventions  of  the  said  vendor,  said  defendant  lam])  companies 
in  (on-idcration  therefor  making  a  c.ish  payment  of  .Sj.sO'OOO  (60 
jier  ci-nt  of  which  said  sum  was  paid  by  (K'fcndant,  Ceiier  d  Klectric 
("onipany,  and  4c  per  cent  by  defendant,  National  l-ilectric  Lanij) 
Conii)any)  and  k'^'hK  ii  certain  share  of  the  profits  on  '"tantalum 
filament  "  lamps  sold  by  said  difendants  in  the  United  States,  and 
iniyini;  from  said  Siemen>  Coinp.my  all  "tantalum  lilaments" 
r((|iiirt(l  by  said  defendants  in  the  manufacture  of  all  said  lamps 
M,-.,ld. 

On  August  17,  iqo6.  defendant.  Cnntial  !-.lc(iri(  Company  made 
an  aurct'inent  with  the  DeutMhe  (ia.-cbihlic  lit  .\ktienf;esellsch.ift 
(AuiT  (lesellMhafl )  of  lierlin,  Germany,  whereby  it.  s.iid  Cieneral 
Electric  Company,  secured  an  option  from  the  said  \iu  r  Company 
coverinij  the  exclusive  rights  for  the  United  States  to  the  "tungsfm 
lilament "    lamp,    hereinbefore   described,    that    might    follow   tlu 

'  Vnitrd  Stales  of  Amrrua  v.  Gnicral  Elcrlrir  Compisny  a»J  others.  tr. 
the  ("in  nil  ("oiirt  of  the  I'niu-d  Siaiis  for  l!ic  Norihcrn  District  of  Ohio,  In 
Kquity,  pp.  .'7  30- 


■  n 


Trum   Mkiiiods 


317 


;jVj)liaitions  and  inventions,  controlkd  by  the  said  Auer  Company, 
,.jr  a  consideration  of  Sioo.ooo  in  ca>h  and  certain  per  lamp  ])ay- 
ments  on  account  of  such  himps  as  should  thereafter  he  manufac- 
tured and  sold  by  it  in  the  United  States.  'l"he  defendant.  General 
l.lectric  Company,  thereu[)on  sold  to  (irfcndanl,  National  Klectric 
Lamp  C<jmpany,  a  40  jht  cent  luidivided  interest  in  said  oi)Ui'n 
■  '11  -aid  applications  and  inventions  so  cmtroiied  by  the  said  Auer 
('i>iii|iany. 

On  April  io,  looo.  defendant.  General  K'ectric  Company,  secured 
:in<iptionon  tin  L'niled  States  patents,  applications, and  inventions, 
i'!ii(|  and  C(ir.lv>il!rd  on  and  before  April  iS.  igoQ,  and  thereafter 
to  be  owned  and  (i.ntroHed  a.t  any  time  from  -aid  (kite  to  July  i, 
IQK),  by  l^jruMnann  I-',lektricitats-\Vei  ke  A.  G.  of  Berlin,  Germany, 
and  Mr.  Signuuvl  iicru'mann,  of  Merlin,  GiTni.iny,  in  or  ri'lating 
to,  or  to  the  manufaeiure  of,  incande-cent  electric  lamp-  and  fila- 
ments of  whatever  character,  al-o  the  processes  and  machinery 
therefor,  and  other  products,  of  the  said  Ber^jmann  Company's 
or  Mr.  Sij^mund  Berfimunn's  incandc-ciiit  Lamp  factories.  This 
option  was  exercised  on  ^Lly  10,  i()0(),  and  i)ayments  in  considera- 
tion tiiereforaj^pretratin;^  Si7>,ooo  were  made  by  defendant,  riiaieral 
Klectric  Company;  and  the  Bv  rj^mann  Company  and  Mr.  Si^numd 
BcrKmann  a^rnd  to  .md  did  cease  selling  and  c'elivcring  incandes- 
cent electric  lamps  to  the  Lnited  States  and  its  possessions  from  and 
after  .Nhiy  10.  I'jO').  and  ;j;uarantee(l  that  the  number  of  such  lam-ps 

lid  and'deln-end  in  the  lnited  States  and  po.-sessions  prior  (o 
May  10.  ioo(),  and  -ub  i'|ueiit  to  April  19,  iqoc),  shouhi  not  exceed 
:oo^ooo  lamp-.  At  a  lati-  date,  the  exact  date  biitv/  to  your 
petitioners  unknown,  defendant,  .National  I'dectric  Lamp  Company, 
purcha.sed  a  four-tenth-  undivided  interest  in  the  rights  under  this 
contract.  Llii-  (ontr.ul  Kivered  "tunR.ren  hhiment  "  I. imp-  .ind 
incandescent  electric  lamps  of  tviry  character. 

The  defend.iiil-,  Ciener.d  Llectric  Comp.my  .md  X.ilion.d  Lle(  ■ 
trie  Lamp  Company,  havinn  accjuired  the  ri^lu-  under  the  ap- 
lilications  and  invention  of  the  -aid  \urr  Comii.iny  and  said 
Her;,'inann  Companv,  theniip"n  pttiectdi  d  to  I'uy  tlu-  ai>plications 
and  inventions  itf  Internationale  Wolfram  L.imi)en  Actienize-ell- 
-chaft  (Just  &  Hanaman),  Bud.ipe-t,  ilan<^aria,  and  Dr.  iianz 
Ku/el.  of  Baden,  Vienna.  Austria,  and  di.l  on  August  15,  iqoo,  by 
contracts  witli  the  said  Jut  &  ILin  imaii  and  Ku/.el.  buy  their  s;iid 
applications  and  invention-  (o\iring  the  "tungsten  tdiment" 
lamp  and  secure  control  tlurd'i  for  a  coiisider.ition  of  Sz^o.ocxj  for 


-.[: 


3i{ 


Industrial  Combinations  and  Trusts 


the  Just  &  ILmaman  applications  and  inventions  and  $240,000  for 
the  Kuzel  applications  and  inventions.  The  aforesaid  ai)plicatior ., 
and  invention.^  and  patents  coverin.i;  the  "tunjj;-lcn  I'llamf 
lamp,  which  were  aeciuired,  as  afore.-aid,  by  defendants.  Genera! 
Electric  Company  and  National  Electric  Lamp  Com' any,  com- 
prised all  the  valual'le  applications  and  inventions  covering  said 
"tungsten  lilament'"  lumi)  known  liy  said  defendants. 

ExiiiBii  4 


—    (OMPANV 


The  Government  alleges  that: 

The  defendant,  — — ,  and  the  other  directors,  officers, 

and  agents  of  the  said  successive  corporations,  from  time  to  time, 
during  the  abine-named  period,  pursued  the  pmicy  of  acquiring 

new  inventions  fur  the  purpc-e  of  eliminating  such 

competition  in  its  infancy  and  preventing  prosjuctive  manufac- 

turer.A  from  engaging  in  the  manufacture  and  sale  of ;  and 

said  officers  and  directors  and  their  agent>,  by  intimidation,  threats, 
and  other  means  of  duress,  sought  to  prevent  and  did  prtvent  other 
inventors  from  putting  their  inventions  on  the  market,  and  by  such 
wronL'ful  and  illegal  acts  ])revented  the  organization  and  lormatiun 
of  competing  concerns  and  hindered  and  [irevented  other  person-. 

firms,  and  corporations  from  engaging  in  the  — —  busincfN 

and  did  thereby  deprive  the  iiublic  of  the  benefit  of  such  competi 
lion. 

GKOIT  2 

Fmiirit  I 


ro%fr.\N'Y ' 


The  Government  alleges  that: 


Tb.    defendant. 


-,  and  the  other  directors,  mana- 


gers, officers,  and  agents  of  the  said  successive  corporaiions  hive, 
from  time  to  time,  during  said  above-named  period  cau.sed  tn 
be    |uir(  li.ist  i|    ,Mi(l    lii\e   purchased    comptting   coni- 

'  United  Slain  of  Amrrua  v.  The Company.     Petition,  In 

Equity.  No.  6.S0J,  In  the Court  of  the  Unilc<i  Stales   for  the Ju 

dicial  District  of .  Western  Division,  p.  22. 

*Op.  lit.  U.  S.  V. Company.    Petition,  pp.  20-21. 


Trust  Methods 


3^9 


panics,  but  concealed  the  fact  of  such  purchase  and  caused  the 
same  to  l)e  continued  in  business  after  such  acquisition  in  pretended 
competition  with  the  defendant  company  as  independent  com- 
[Kinies,  for  the  purpose  of  interfering  with  other  manufacturers, 
dcilers,  and  agents.  Said  directors,  mana<j;ers,  and  ntTicers  have 
emi>loyed  "-pecial  a.gents  who  were  instructed  and  directed  to  falsely 
and  fraudulently  represent  themselves  to  be  engaj^ed  in  the  busi- 
ness of  dealing  in independent  of  and  in  competition 

with  said  successive  corporations,  for  the  j)urpose  of  deceiving 
such  competitors,  and  of  wrongfully  acquiring  information  con- 
cerning their  business.  Said  agents  thereupon  carried  out  such 
instructions  and  directions,  and  by  means  of  such  false  representa- 
tions the  said  successive  cor[)orations  did  obtain  valuable  informa 
tion  relative  to  the  business  and  tinancial  alTairs  of  such  competi- 
lurs.  Through  the  activity  of  such  special  men  and  by  means  of 
such  false  representations  the  said  successive  corporations  did  ob- 
tain valuable  information  concerning  such  comi)etitors  whicli  en- 
abled such  corporations  to  greatly  injure  them  in  their  business, 
as  a  result  of  which  such  special  men  were  enabled  to  and  did  nego- 
tiate with  various  manufacturers,  dealers,  and  agents  for  the  pur- 
chaseof  their  property  and  business,  and  did  by  meansof  such  unlaw- 
ful methods  succeed  in  purchasing  the  proi)erty  and  business  thereof, 
and  thereby  did  eliirunate,  suppress,  and  destroy  such  competition. 


.'g  ''l 

■  ^ 

EXIIIIUT 


("OMl'ANV  ' 


it,.    ,    IT.DDI.IK,    OMMNrA.    N.  Y.,  A.Nl)    IROY,    N.  Y. 

ONEONtA,    N.     Y. 

The  Government  alleges  ihat: 

D F.  O ,  who  testilied  .is  ,i  witni»  for  the  (lovernment. 

i!i.cribed  in  detail  the  remarkable  operations  which  he  carried  out 

under  the  instruction  oi  T officiais.     (Vol.  5,  p[).   243,^-50.) 

Hi-  testimony  is  corroborated  by  corresjwndence  and  is  in  no  way 
cmtradicted  or  e\plaintd  by  any  witne'-s  I'or  the  defend.mts. 

'•         ,  V. ho  had   prc\io\isly  been  a driver  for  the 


Cmnpany  of 


fur  the  United  State-;,  la 

.'iJj.  519-530.  533-534,  5J^-S39.  S4-»-54S.  553-554.  580-5^^ 


V.  I'liiled  Stairs  of  Amrriiu.        Hricf 

Court  of  the  L'nilcd  Stales.  \    1    .•  .  pp.  5^3- 


IXULMKIAL    CoMDlXAl'lUXS   ANU    TkLSTS 


T Comixiny,  was  approaclicd  at  his  home  at  ni;^'ht  about 

Man  h,  iSgy,  by  U 1  C ,  Uk-  T "s  a,t;cnt  at  Troy.  X.  Y., 

who  infonnod  him  that  X .  thcT 's  mana-^cr  .t  Albany,  had 

soiiif  important  work  for  him  to  do  which  must  Ijc  kept  entirely 

secret,  even  from  G 's  own  family.    .\t  his  instance  G met 

II and  also  O ,nianaf;er  fnr  theT — —at  liin^diamton.  X.^■. 

They  told  him  that  the  T— —  had  eompetitinn  at  Oiieonta.  X".  \'., 

from  the  U Company, which  had;    t  the  bulk  of  thetraiK, 

and  that  they  wanted  to  <;et  it  back;  chaL  fcr  that  purpo.-e  they 
wanted  to  L:;ft  the  stnrekeipers  to  ti.irhtin,!,'  with  one  another.     He 

was  dirdled  to  po  tc;  the  I" Company  at   iiin.uhamton, 

X".  Y..  and  buy  25  barrels  of  oil  and  ha\e  it  shipped  to  W'orcesti  r. 
from  which  i)hice  he  was  to  reship  it  to  Onecnta.    The  reason  for 

this  i)roce<lure  ua>  that  if  tlu'  I' Company  knew  that  he 

wanted  to  sill  oil  at  Oiunnta,  vdiere  it  v.a-^  already  doin<.^  businer->, 
it  would  not  >u|)pl_\'  him.      They  directi'il  hir     .0  sell  this  oil  at 

Oneonta   to  consumers,  putting'    the    si,L'n    "I' oil"  on   hi> 

waf;on,  and  to  sell  it  at  S  eer.i>  a  ^'allon,  which  was  the  -ame  price 

he  hud  t"  pay  the  I' for  it.  at  Hinjihaniton. 

H — —   and  U told  (J- that  lie  mu>t  not  tell  anyone  for 

whom  he  was  workin;:.  l)Ut   must  >ay  that   he  was  wi irking  fur 
himself,  and  they  -u^L-e-ti'd  a  fal>e  excuse  which  he  miirht  ^ive  the 

nianafjer  of  the  U Company  wlien  pur(ha>in^  this  nil. 

He  was  also  directed  how  he  should  conduct  corre>i)ondence  with 
O . 


G followed   out    tlie.-e    in>lructions;  put    a   w.iL;on  on    llie 

streets  at  Oneonta  with  a  si^'n.  "U "  upon   it.  and   -nhj  tiie 

oil  to  consumers  at  S  cint>  a  .1,'allon,  which  \va.>  the  same  a-  the 
wholesale  price  to  retail  dealers.  The  retail  slorekeei)ers  iuid  been 
selling  at  10  cents  a  gallon.  The  result  of  the  cut  which  he  made 
wa-  that  the  merchants  p)t  to  cutting  prices  aj^ainst  him  and  then 
aj^ainst  one  another,  and  tinally  sold  oil  at  2  cents  a  gallon,  and  one 
put  out  a  sifjn,  "  1  n  e  oil;  coii.e  and  j;et  your  ca.i>  I'llled."' 

G bought  one  other  lot  of  oil,  15  l)arri'l-:.  from  theU .but 

later,  beinj;  unable  to  gvl  any  more  U nil  under  instructions 

he  fjot  his  oil  dire<  tly  from  the  T Comp.my,  thoui;h  it 

was  shipped  in  blank-heail  barrels,  which  were  d.irl    in  color,  while 

the  T 's  barrels  were  green.    After  ihi-  lu  did  not  (iisi)iay  the 

sign  "U oil." 

He  was  instructed  by  O not  to  try  to  sell  too  much  oil,  as. 

of  course,  a  loss  was  involved  on  every  gallon  sohj.    The  object,  as 


Trust  Methods 


321 


^hcwn  by  the  correspondence  put  in  evidence,  was  to  get  and  keep 
ihc  storekeepers  in  conflict  with  one  another  on  price  cutting. 


F 


COMPANY. 


C.  H.  N ,  who  was  employed  in  the  office  of  the  T at 

lialtimorc  as  stenographer  and  later  as  assistant  to  the  manager, 

tc•^titied  that  in  1897  and  1898  C operated  the  V 

Company  at  Norfolk,  Va.,  and  el.sewhere,  as  a  bogus  independent 

concern;  that  this  comjnxny  obtained  its  oil  from  the  T ,  but 

tuld  itself  nut  to  be  indepenikiit.  and  its  elTort  was  to  turn  the 

l)u-.iness  of  real  independents  into  T channels.     The  oil  was 

shi[)ped  to  C— —  in  blank  head  barrels,  that  is,  barrels  with  no 

name  upon  them,  while  the  practice  of  the  T was  to  place 

its  name  ])lainly  upon  all  barrels  to  its  regular  trade.      X says 

that  C cut  prices  against  the  independent  concerns  and  secured 

a  large  proj^ortion  of  thtir  business.     (N ,  vol.  — ,  pp.  2  t,()o-(-i 2 .) 

1).  il.  CI ,  who  was  the  agent  of  the  T Company 

at  Norfolk  at  this  time,  testilied  regarding  the  circumstances  under 

which  the  F Company  started  in  business  at  Norfolk. 

(V..1.  — ,  pn.  2211-12.)     He  said  that  there  was  at  Norfolk  at  this 

time  a  pe<idler  named  K selling  oil  to  consumers,  that  the 

lnoiness  had  become  of  considerable  im[)ortance,  and  that  K- — ■ 

hought  his  supplies  partly  from  the  T .    F.  E.  Q- ,  who  was 

in  .h.irge  of  the  refined  oil  departnuiit  of  the  Baltimore  division, 

t'lld  G that  il  was  important  not  to  let  e\en  their  own  cus- 

I'-niers  get  too  large,  and  at  his  instance  G tried  to  buy  out 

savs  that  () thereupon 


Cr- 


K ,  but  could  not  do  so 

M-nt  C to  Norfolk  to  operate  in  the  name  of  the  F - — - 

Cnm[)any;  that  he  was  instructed  to  vi>it  only  K "s  trade  and 

n<it  to  visit  the  T— -'s  customers,  and  that  he  carrieti  out  these 

instructions.     He  said  that  C failed  to  destroy  K 's  tr.ide 

in  this  way  and  tlien  made  an  olTtr  for  hi>  busir,--^  and  bought  him 

«  it,  and  continued  to  operate  for  some  time  as  the  F Coni- 

p.my. 

li roNrPANY. 

About   1897  the  T Comjiany  bought  out  the  R 

Company,  which  hatl  a  refinery  at  Marietta,  Ohio.     (Vol. 

~'P-  .3.V>7'  I  he  refinery  was  closed;  i)ut  it  was  doubtless  because 
of  its  re|)utation  as  an  independent  establishmen.t  that  the  T  - 
^<Km  after  selected,  the  name  "B  - —  Relining  Comi)any"  under 


ii 

I- 

i 


32^ 


LnUUSTKIAL    e'oMBINATIONS   AND   TRUSTS 


^hich   to   do  a  boRus   independent    business   at    Richmond,   Va 


rhei 


monc 
ction  between  the  two  con- 


jre  a])i)ears  to  be  no  i)ractical  connet 
cerns.     (Vol.  — ,  jjp.  2537-41.J  ■ 

C testified    (vol.   — ,  2445-47)  ll^at  in  the  latter  part  of 

i8qS,  under  the  direction  of  Q ,  of  the  Baltimore  office,  he  went 

to  Richmond  to  invest i,i,'ate  the  contlitions  there.  He  found  that 
the  si)ecial  a^ent  of  the  T ,  Mr.  X ,  had  caused  dissatisfac- 
tion in  the  trade  by  cm]iloying  colored  dri\er.-,  and  by  refusing,'  to 
sell  in  less  than  20-Kallon  lots  (note  that  this  i-  just  what  he.siys 

G did  at  Norfolk),  and  as  a  re.-ult  of  his  prejudice  the  V 

Company,  an  independent  concern,  v.as  doing  "a  right  smart 

busine>>."      Q directed  him  to  go  to  Richmond  and  operate 

under  the  name  of  the  15 Relining  Company,  for  the  [)uri.H)>c, 

C- claimed,  of  waking  up  X and  teaching  him  hi)W  to  get 

the  bu^ine^^.     lie  admitted  that  after  he  had  been  ojKrating  the 

B Retining  Company  for  si)me  lime  the  V did  not  have 

VL-ry  much  trade,  and  that  the  B had  worked  up  a  good  business. 

In  Augu-t.  i8i;9,  C ,  in  the  name  of  'he  B ,  bought  out  the 

V ^ Company,  with  money  furni:.hed  by  the  T .    (Vol. 


pp.    -54<r5'-) 


w- 


WORKS. 


Early  in  iqoi  C wa-  transferred  to  Baltimore,  and  operated 

there  under  the  name  of  the  W— Work^,  continuing  to  do 

so  until  1905.    Thi>  concern  was  held  out  to  be  independent  of  the 

T .     C himself  admitted  that  his  price>  were  below  the 

T Company's  regular  market  price>  in  Baltimore.     (\»1. 

-  .  p.  2405.)     There  is  no  de-iial  that  the  'V Company 

was  throughout  controlled  by  the  T . 

H ,  of  the  Red  '' — "  Company,  testifnd  (vol. 


started  into  bu^ine-s  C- 
wagon  <lrivers  of  the  Red 


pp. 
at- 


2:;20-i)   that   when   the  VV- 
lempted  to  hire  away  the  - 
that  the  \V presented  to  cu>tomers  as  ;in  argument  to  show- 
that  it  was  indepenilent  the  fact  that  it  cut  the  '1' "^  prices,  and 

on  the  other  hand,  claimed  that  the  fact  that  the  real  independents 
did  not  cut  the  price  was  i)r(.of  that  they  were  controlled  by  the 

'I" .     C also  circulated  in  the  trade  the  false  rei^ort  that 

the  plants  of  the  T and  Red  "  — "  companies  were  connedcd 

i)y  underground  pipes. 

\ ,  who  was  then  in  the  otiice  of  the  T     ^    .  >tated  (vol.  -  . 

pp.  2374-75)  that  the  T em|>loyid  nun  to  follow  the  waL'^n.^ 


Trust  Mctiiods 


323 


of  the  independent  concerns  in  Bait 


D- 


M- 


imore 

isls 


especially  those  of  the 


Company,  and  get  lists  of  their  customers,  which 
were  turned  over  to  C . 

Mr.  V — — ,  Baltimore  manager  of  the  I) M—  (Company, 

jii  independent  concern,  testilied  (vol.  — ,  pp.  71-2)  that  during 

1904  the  W — —  attacked  the   D M Company's  trade, 

cutting  the  [)rice  one-haU'  cent  a  gallon;  that  the  1) M 

(jiinpany  had  to  nuTt  this  price,  whereupon  the  \V v.ent  down 

a  half  cent  farther,  and  -o  on.  until  linally  the  W Cop'.- 

[lany  was  selling  at  0  cents;  that  the  D M Company  did 

r.'.t  meet  this  price,  but  sold  at  7  cents,  and  that  the  T 

Ciim])any's  open  i)rice  at  the  same  time  was  S  cents.    V said 

that  he  then  went  to  the  customers  of  the  !) M Company 

:inil  told  them  that  he  could  could  '  not  go  down  any  farther,  but 
prmiii^ed  them  that  later,  when  the  price  would  ad\ance  after  the 
iiuht  was  over,  he  would  make  them  a  reduction  on  the  then  turrent 
I  rice  equal  to  that  which  C otTered  during  the  light. 

S.  testitied  that  he  was  employed  by  (' to  work 

for  the  VV Comi)any  in  IQ04  and   i()05,  driving  a  tank 

wagon;  that  C told  him  to  go  after  the  D M Com- 
pany's customers  and  otTer  a  rebate  of  about  one-half  to  three- 
fourths  of  a  cent  below  the  T 's  market  price;  that  he  \\a. 

instructed  not  to  sell  to  the   T— — 's  trade  except   at  the  regular 

market  price,    ile  said  C told  him  that  the  \V Con> 

pany  was  not  controlled  by  the  T ,  but  that  he  showed  him  a 

list  of  D M Company's  customer?  and  told  him  that  he 

shoulij  not  go  to  any  trade  in  jjarticular  except  that  of  D M ■ 

Company.     (Vol.  — ,  pp.  193-4-) 


"i 


WORKS. 


— - —  Company  was  organized  as  a  corporation  by  the 
Comjiany  of  Savannah,  (ia.,  aixait  iSg7  or  iS(^'^.    Th 


The  E 

I Conipany'had  previously  been  engaged  exclu  ively  in  tin 

naval  stores  business,  and   had   entered   the  petroleum   business 
because  the  T— —  was  coniinting  with  it  in  i„i.al  store>.     The 

E •  Conii)any  did  Ijusiness  at  Savannah,  New  Orleans, 

Mobile,  Birmingham.'  and  eKruhere.     The    T .  acconiing  to 

thotestimonvof  V..  \.  I -,\\ho  was  then  employed  by  iheT , 

cut  prices  heavily  against  the  E and  linally,  about  iSyy,  bought 

'  1 I1U2  in  the  original. ^I'.ii. 


3*4 


Industrial  Combinations  and  Trusts 


it  out.     Its  name  was  changed  to  the  E —  Works,  and  it 

was  thereafter  run  by  the  T as  a  bogus  independent  concern, 

doing  business  in  numerous  places.     ( ,  vol.  — .  pp.  2107-8; 

-,  vol.  — ,  pp.  2279-So.) 


In  the  territory  of  the  Baltimore  marketing  division  of  the  T , 

which  covers  the  South  Atlantic  States,  the  E Works  was 

operated  under  the  supervision  of  C.  W.  C .    C.  H.  N whn 

was  in  the  Baltimore  office  of  the  T up  to  about  iqo^,  testified 

that  the  accounts  of  the  E were  kept  in  the  books  of  the  T 

in  the  name  of  C.  W.  C ,  agent;  that  C reported  to  the 

T —  Company;  that  about  igoi  he  began  to  extend  the 

business  to  towns  in  the  Carolinas,  Virginia,  and  Maryland;  that 

the  E made  a  special  effort  at  all  competitive  points  to  get 

business  away  from  independent  concerns;  that  it  gave  special 
commissions  to  distributing  agents  who  had  formerly  handled 
independent  goods,  to  get  them  to  become  its  agents,  and  that  it 
cut   prices. 

N also  said  that  while  special  efforts  were  made  by  the  E 

to  get  trade  from  the  ir dependent  companies,  now  and  then,  for 

effect  only,  it  would  take  a  customer  from  the  T .     (Vol.  — , 

PP-  2363-4.) 

W.  H.  H ,  manager  of  the  Red  "  — "  Company,  gave  similar 

testimony.    He  said  that  the  F. took  away  from  the  Red  "  — ' 

its  agent  at  Columbia,  S.  C,  Marion,  N.  C,  Xewton,  N.  C,  Char 
lottesville,  Va.,  and  Silver  Sprmg,  M<1.;  that  it  cut  prices  to  take 
away  the  business  from  the  Red  " — ,"'  and  after  it  had  secured  thi 
business  it  so  managed  matters  as  ultimately  to  turn  it  over  to  the 

T Company;  and  that  it  at  all  times  held  itself  out  to  bt 

independent.     (Vol.  — .  pp.   2^17-iQ.) 


The  evidence  shows  clearly  that  the  E was  used  particularly 

to  get  trade  from  the  inde])endent  concerns.    H.  L.  S ,  manager 

of   ihe  P Company,  of  Norfolk,  Va..  an   independent 

concern,  testified  that  his  company  was  attacked  by  the  T ,  lirst 

through   the  () helivery   (hereafter  referred  to), 

which  sold  to  con-unurs.  and  ^tnm  after  also  by  the  E 

Works,  which  solicited  the  trade  of  retail  dealers;  that  the  E 

avoided  the  custonur.--  of  the  T  —  and  solicited  only  the  dealer- 
who  bought  from  the  i'  -     ;  thai   it   cut  the  prices,  and  in  some 


Trust  Methods 


32s 


cases  would  offer  5  gallons  of  —  free  on  a  purchase  of  25  gallons; 

that  the  K tried  to  hire  the  driversof  the  P Company 

regardless  of  salary,  telling  them  that  a  position  with  the  E 

would  be  more  permanent  as  the  P would  soon  be  off  the  streets; 

and  that  the  E cut  the  price  of against  the  P 


I      as  much  as  ^;i-^  per  cent. 


R- 


COMPANV,  ATLANTA,  GA. 


K.  N.  J- 


testified  that  for  some  time  prior  to  1898  the  L 

Company  and  the  R 's Company  were  independent 

uincerns  doing  business  at  Atlanta;  that  the  T so  reduced  the 

prices  of that  there  was  no  profit;  and  that  the  L and  the 

which 
's 


-'s  companies  were  forced  to  sell  out  to  the  T- 
after  operated  the  business  under  the  name  of  the  R- 


UUTC 

C  niiiany  as  a  bogus  independent  concern.    (Vol.  — ,  pp.  2094-99.) 

Alter  the  R 's  - — -  company'  became  a  bogus  independent 

voncern  under  the  control  of  the  T ,  J was  put  in  charge 

(if  it.     He  testified  (vol.  — ,  pp.  2099-2103)  that  he  reported  to 

i;.  C.  M ,  cashier  in  the  main  office  of  the  T of  ,  at 

Cincinnati,  Ohio;  that  these  letters  were  sent  to  a  post-office  box 

which  was  not  the  regular  box  of  the  T Company;  and 

that  under  instructions  he  held  the  R 's  out  to  the  trade  as  an 

independent  company. 


BOGUS  PEDDLING  CONCERNS  AT  CLEV}:LAND. 

C.  J.  D testified  (vol.  — ,  pp.  3054-56)  that  about  1902,  at 

which   time   he   was   in   the   independent   business  at  Cleveland, 

the  r operated  some  peddling  wagons  in  Cleveland  known  as 

Z Line  wagons,  which  were  managed  by  a  man  named  A , 

holding  himself  out  as  independent,  and  which  sought  the_  trade 
<it  peddlers  who  were  purchasmg  independent  oil. 


The  reason  why  the  iieddling  outfits  were  started  by  the  T 

at  Cleveland  is  evidently  the  fact,  testified  to  by  Castle  (vol.  — , 
pp.  ^054,  3056),  that  there  had  been  a  very  large  number  of  peddlers 
operating  in  Cleveland,  and  the  fact  that  there  was  a  large  volume 
of  independent  business  there.     Ca.  tie  staled  that  as  a  result  of 

the  competition  of  the  J Ljlivery  and  the  Z Line 

1  Thus  in  the  original. — Ed. 


,^26 


Industriai,  Combination's   '.-.d  Trusts 


wagons  which  preceded  it,  the  number  of  peddlers  was  reduced 

from  about  250  to  about  50.     K seeiss  to  e.\i)lain  the  decline 

in  the  number  ui  peddlers  by  the  increasinj^  consumption  of  natural 
gas  at  Cleveland  (vol.  — ,  pp.  13,51-32)  and  gives  some  statis'ics 
of  the  number  of  natural  gas  meters  in  use,  but  he  fails  to  give  chf 
only  statistics  which  would  really  be  significant,  namely,  the  riuan- 

tityof sold,  of  which  he  must  have  a  \ery  accurate  record  both 

for  the  T "s  sales  and  for  those  of  independent  concerns. 


Exhibit  .5 


E.  I.  DU  PONT  DI-:  NEMOURS  POWDFR  COMPANY  ' 

"  Q.  Do  you  know  of  the  employment  of  a  yellow  dog  company? 

A.  I  have  been  told  that  the  Climax  Co.,  and  the  New  York 
Powder  Co. — 

Q.  What  do  you  know  about  the  yellow  dog  companies,  if  any- 
thing? 

.\.   May  I  ask  a  cjuestion? 

Q.  Yes. 

A.  If  the  i)resident  of  the  company  told  me,  am  I  p)ermitted  to 
answer? 

Q.  Yes.    That  is  my  judgment,  unless  the  gentlemen  ditTer  with 

me. 

A.  Durinsi  the  conversation  with  Mr.  T.  C.  du  Pont,  the  presi- 
dent, in  which  he  was  endeavoring  to  explain  to  me  the  objects  of 
the  tru^t,  he  told  me  that  no  one  man  coukl  sell  all  the  powder,  or 
any  othei  article,  in  any  particular  territory,  and  it  was  necessary 
for  him,  therefore,  ju^t'like  a  little  boy,  to  have  a  dog,  to  which  he 
could  whistle  and  call, 

().  What  kind  of  a  dog? 

.\.  He  termed  it  "a  yellow  dog,"  and  he  explained  to  me  that 
after  I  had  exhausted  all  my  resources,  and  those  of  the  travelini; 
men  under  my  office,  th.it  if  I  was  not  able  to  regain  llu-  trade,  that 
I  was  to  whistle  by  writin.g  a  letter,  and  they  would  then  send  on  a 
little  yellow  dog,  which,  at  th.al  time,  in  the  high  explosives  busi- 
ness, was  known  a-  the  Clinuix  Pow(ier  Manufacturing  Co.,  of  tm- 

'  Tcstinimiv  (if  F.  J.  W.uldcU.  I'tiUcJ  SUIc^  of  Amrrka  v.  E.  I.  du  PonI  dt 
Niinuiirs  andL'ompdii\.  In  C  ire  uit  (.'ciurl  ol  ihu  Uuilcd  Stales  for  ihc  iJislrkt 
iif  Utlawate.    Pet.  Ret.  Tcitirauuy,  \ol.  II,  (jp.  085-687. 


|.,n 


Trust  MF/mons 


3-^7 


itii  ^ 


porium,  and  the  New  York  Pdwcler  Co.,  of  Xcw  Vcirk.  But.  ll;c 
trniilik'  was  to  keep  the  little  yellow  doj^  away  from  tlie  trade  that 
v,;i-  not  niolesti'd. 

i).  Had  you  occasion  to  whistle  for  the  little  yellow  doj^'? 

A.   Ves,  sir. 

().   Did  you  do  so? 

A.  Yes,  sir. 

Q.  What  occurred.'     State  what  you  did? 

A.  If  we  met  the  prices,  that  meant  the  Knvcrint^  of  our  prices 
(111  our  brands;  but  the  little  yellow  do^  would  come  in,  and  we 
would  say  that  we  didn't  recognize  them  at  all,  that  their  goods 
wrre  of  no  account,  and  were  of  low  grade,  and  all  that  kind  of 
thing;  so  wc  didn't  have  to  lower  our  prices  to  the  adjoining  trade; 
l)Ut  the  yellow  dog  got  the  business. 

().  Would  you  sell  for  the  yellow  dog? 

A.   N'csir.' 

',».  To  whom  did  they  belong  to,  if  you  know,  that  i^,  the  Climax 
I'uwder  Co.,  and  the  New  York  Co.? 

A.    I'o  the  trust. 

'J.  Tothetru>t? 

\.   ^■es,  sir. 

<„)    Was  that  the  E.  I.  du  Pont  de  Xemours  Powder  Co.? 

A.  Yes,  sir." 

ExHiniT  4 

AMERICAN   TOBACCO   COMPANY  = 

The  most  important  motive,  hov.evcr,  for  the  continuance  of 
separate  corporate  existence  in  the  case  of  many  concerns  has  been 
the  desire  of  the  Combination  to  keep  its  control  secret.  There  is  a 
strong  feeling  among  many  dealers  and  consumers  against  "trusts" 
in  general  and  the  "Tobacco  Trust"  in  particular.  Independent 
manufacturers  ^.ave  extensively  taken  advantage  of  thi'>  feeling 
and  have  advertised  their  goods  as  "Indejie; dent,"  "Not  made 

V  a  trust,"  and  so  forth.  The  attitude  of  the  American  Tobacco 
Company  and  its  openly  afTiliated  concerns  in  refusing  to  deal 
with  labor  organizations  has  also  caused  ho~tilit^•  among  uniiM 
laboring   men,    many   of   whom    insist    on    Iniying   "union-laijel" 

'  Thus  in  the  original. — Ed. 

-  Rt-port  of  the  Commissioner  of  Cori^irations  on  the  Tobacco  Industry, 
I'.irt  I,  pp.  jo-ji. 


i! 


•ft 


328 


IxDUSTRiAi.  Combinations  and  Trusts 


goods.  Manv  independent  manufarturcrs  have  availed  themselves 
of  the  union-label  sentiment  to  build  u[)  a  trade. 

In  order  to  overcome  the  elTects  of  the  antitrust  sentiment  and 
the  union-label  sentiment,  and  even  t<>  take  advantage  of  them, 
the  Tobacco  Combination,  particularly  durint,'  loo,:;  and  1004, 
secretly  acquired  a  cftntrollinj:;  interest  in  numerous  concerns 
which  had  been  catering;  to  customers  who  heKl  thoM;  sentiments. 
Such  concerns  continued  to  operate  under  their  former  manafremenl 
and  kept  up  a  pretense  of  indejjendence  and  of  hostility  to  the 
Combination.  Those  which  employed  union  labor  continued  to  do 
so  and  advertised  the  union  label.  These  secretly  controlled  con- 
cerns were,  until  the  facts  were  disclosed  by  the  Government,  a 
powerful  engine  of  warfare  against  the  genuine  independents  and 
were  looked  upon  by  the  latter  as  their  wor>t  enemy. 

Among  the  concerns  (»f  which  conLrol  was  thus  sicretly  acquired 
and  for  a  greater  or  less  period  secretly  maintained  by  the  American 
and  Continental  tobacco  companies  are  the  following: 

R.  A.  Patterson  Tobacco  Company,  Richmond,  Va. 

H.  N.  Martin  &  Co.,  Louisville,  Ky. 

Queen  City  Tobacco  Company,  Cincinnati.  Ohio. 

Pinkerton  Tobacco  Company,  Zanesville.  Ohio. 

F.  F.  .\dams  Tobacco  Company,  Milwaukee,  Wis. 

Nail  &  Williams  Tobacci^  Com])any,  Louisville,  Ky. 

Nashville  Tobacco  Works.  Nashville,  Tenn. 

F.  R.  Penn  Tobacco  Company,  Reidsville,  N.  C. 

Wells-Whitehead  Tobacco  Company,  Wilson,  N.  C. 

H.  Bolander  (Incorporated),  Chicago,  111. 

D.  H.  .Si)encer  &  Sons  (Incorporated),  Martinsville,  Va. 

My"f;icturers  Tobacco  Company,  Louisville,   Ky. 

Michigan  Tobacco  Comp:'ny,  I.V'troit,  Mich 

B.  Leidcrsdorf  &  Co.,  Milwaukee,  Wi  . 

R.  P.  Richardson,  jr.,  &  (^).,  (Incorporated),  Reidsville, 

N.  C. 
Standard  SnufT  Comjiany,  Xashville,  Tenn. 
Liipfert-Scales  Cornjjany,  Winston-Salem,  \.  C. 
Craft  Tobaccc;  Company,  New  Orleans,  La. 
Mellor  &  Rittenhousv-  Philadelphia,  ['a.  (licorice). 
Jolinston  Tin  Foil  and  Metal  Com])any,  St.  Loui^.  Mo. 

(tin-foil) 
J.  S.  Young  Comi)any,  Baltimore,  Md.  (licorice). 


Trust  Methods 


329 


EXHIIilT    5 

INTEIJN'ATinX  \I.   IIARVr.STr.R    COMPANY  ' 

The  Government  alleges  that: 

In  January,  iQO^,  in  pursuamc  of  the  ^cncnil  purpose  of  de- 
fepiianls,  defendant.  International  Harvester  Company,  acquired, 
through  purchase  of  ail  the  capital  stock  of  and  subsequent  convey- 
ance from  D.  M.  Osborne  &  Co.,  a  New  V'ork.  corporation,  with  a 
plant  at  Auburn,  N.  Y.,  cnf;;aged  in  interstate  trade  and  commerce 
in  harvesting  machinery,  twine,  and  tillage  implements,  and  in 
nianufacturing,  selling,  and  distributing  harve^ting  machinery, 
twine,  and  tillage  implements  throughout  the  United  States  in 
competition  with  it,  all  grantor's  business  (f  manufacturing  and 
selling,  dealing  in  and  (listril)Uting  harvesting  aachinery  and  twine 
a>  a  going  concern,  all  assets,  property,  and  good  will  and  the  exclu- 
sive right  to  use  the  corporate  name,  paying  therefor  cash  and  tive- 
ycar  notes.  The  principal  owners  of  the  grantor  company,  long 
>uccessfully  engaged  in  manufacturing  and  selling  harvesting  ma- 
chinery, agreed  with  grantee  to  enter  its  service  for  a  certain  period 
in  managing  the  business  and  property  acquired  and  not  otherwise 
or  thereafter  to  engage  in  or  carry  on  or  become  interested  in  the 
liuMness  of  manufacturing  cr  dealing  in  harvesting  machinery. 

After  the  five  concerns  had  gone  into  the  Interna' ional  Harvester 
Cnmpanv,  the  Osborne  Company  remained  by  far  the  largest 
single  manufacturer  outside  the  combination. 

For  two  years  defendant.  International  Harvester  Company, 
concealed  and  denied  its  association  with  D.  M.  Osborne  &  Co., 
and  operated  the  latter  as  an  independent  company. 

GROUP  3 

Exhibit  i 

COMPANY ' 


The  Government  alleges  that: 
From  the  year  1S90,  up  to  the  present  linie,  the  said  defendant, 
—  - — ,  and  the  other  director.^,   managers,  olTicers,  and 

^United  Slalr^  rf  Amrrini  v.  Intcrnatiimal  Harvester  Company  and  Other<:. 
Petition  in  E<iuit\.  In  the  l)i-triil  (."ourl  of  the  riiili-il  S!;;lc.-  for  the  District 


of  Minnesota,  pp. 

'ttltion.  tip.  .50-51. 

"■  Op.  cit.  U.  S.  V. 


Tliis  (h:ir,t;r  i-^  admiltnl  in  iJelendanl's  .Answer  to 
Company.     I'ctitiun,  p[).  14-1(1. 


33° 


I.NULSllMAI.    ('().\I1!I.\  VnoNS   AM*    ']'kt:sTS 


atrcnt^ 


'1  th 


e  said 


several  successive  corporations,  consijiring  ari'i 
coiilcdirating  logethtT,  have  maintained  a  dcparimt-nt  of  each  and 


every  of  said  successive  corporations  for  th 


e  purjjose  of  stillmj;  and 
supi>re-;>inc  competition  with  them  re-pectively.  i'hi>  deDartmint 
was  >ometinir>  called  the  "Cmiipelition  department,"  at  oliuT 
times  the  "Wa}^--  and  means  department."  and  ai  otiier  linie'^  liv 
varioi/s  other  names  It  was  composed  ')f  an  active  head,  with 
other  ofTiCcrs  and  departmental  manafjers  of  the  said  several  cnr- 
porations.  It  employed  a  force  of  special  men  who  were  particu- 
larly instructed  ami  directed  to  suppress  and  destroy  th^  business  of 
competitors  enKaged  in  interstate  and  foreign  traile  aiid  com- 
merce, and  l(.i  harass  and  discoura.ge  and  force  out  of  business 
such  competitor-  who  were  either  manufacturers,  dealers,  or 
ajjents. 

These  s[)ecial  men  were  generally  knou  n  a<  ••  kn<xkout "  men,  and 
were  emi-loycd  for  the>[)ecial  [turposeof  interfering  with  thi'  nepnti- 
ations  of  the  contracts  of  sales  of  such  cnm[)etitors.  The  >aid  de 
I)artment  also  em[)Ioyed  secret  agents  who  were  instructed  and  di- 
rected to  s{)y  uf)on  the  business  of  such  competitors,  to  fraud  -^'Iv 
obtain  inlormation  a^  to  their  sales  and  shi[)ments,  and  to  ,,".rt 
such  infc^rmation  ■  said  depa'-tment,  where  it  was  used  for  the  pur- 
pose of  discouraging  pros[)ective  [)urchasers  of  other s. 

Other  secret  >i)ies  ,ind  agents  were  from  time  to  tiine  employed 
by  >,ii(i  dei)arlment,  with  instructions  to  report  the  names  of  cus- 
tomers of  such  competitors,  .ind  to  repnrt  other  inlorniaticm,  whiih 
was  tliereui)on  useil  bv  said  department  in  iilocking,  and  in  secur- 
ing llie  reseinding.  of  cntracts  of  sale.s  by  such  competitors,  and 
wrongfully  intertering  with   tluir  business. 

1  he  s.i:d  department,  from  time  to  lime,  wrongfullv  and  secretly 
engaged  the  services  of  the  employees  of  such  competitors  and  in- 
struttiil  and  directed  them  to  furnish  to  s,.id  (Kt),irt:nent  conliden- 
tial  inlormation  concerning  the  business  of  such  competitors;  and 
.;^uch  information,  v  hen  so  reported,  v.as  used  by  said  department 
in  unlav.i'ully  and  fraudulently  obstructing  and  sii|)pressing  such 
trade  and  commerce  of  such  competitors. 

Su(  h  de[iartment,  from  time  to  time,  sent  out  instructions  to  the 
agents  of  the  .>ai(i  several  successive  corymrations,  advising  and 

directirg  them  how  to  manipulate  competing ,  for  tin 

purjMise  of  showing  defects  and  for  the  purjtose  of  discouraginu' 

u>ers  of  such  ,  and  for  the  further  jmrpose  of  having  such 

users  rescind  their  contracts  of  purchase. 


I 


Tki  ST  Ml. nioDS 


oil 


The  said  department  also,  from  time  In  lime.  iii>truLted 
directed  its  agents  to  purchase  information  from  agenfs  ar,  1 
ployees  of  competing  manufacturers  and  dealers  relative  U 
l)U^iness,  plans,  and  cu>tomers  of  such  competitor>,  and  tn 
cure  information  ffim  the  employee-  of  raiIroad>,  exjjn 
iKiiiies.  hotel  companies,  and  other>  as  to  the  plans  and  purpi)> 

.      ipetilors  and  the  >hipmen' ^  of  their  ,  and  to  report 

liii.irmation  to  said  departmi  it,  wiiere  it  w.is  used  in  (/l)>t 
iiig  and  suppre—ing  such  trade  and  commerce. 

.\11  of  such  instructions  anfi  direc'ions  as  above  set  forth 
acted  upon  by  such  agents  s)  receiving  them,  and  thi-  policy 
plan    of    the    defendants   o]H'rating    said    succe->ive    corpora 
through  said  department  was  hy  such  agent>  carried  out. 


iind 

itii- 
>  the 

pro- 
com- 
-e-  of 

r-u(h 
ru(t- 

were 

and 

tions 


EXHIKIT 


COMPANY 


The  Government  alleges  that: 

It  appears  from  the  i     dence  that  tlu    V ('om[)any  has 

a  general  .statistical  department    with   head(|uarter>  at  —  , 

I'lie  of  the  chie!  functions  of  which  is  to  keep  aicurate  rtcords  of  the 
M'lume  of  l)usine>.s  done  by  competitors,  and  th.it  tlu'  information 
rriMrding  shipments  and  businc'^s  of  coni]>elitors,  secured  from 
r.nluay  sources,  is  all  re|)orted  ultimately  to  thi>  central  ofHice. 
rile  (lovernment  had  nnu  h  difliculty  in  securing  from  the  otikers 

iif  the  T Company  an  admission  even  of  the  existence  ol 

this  stati'itical  dipartment  and  of  thi  fact  that  -ut  h  records  of  the 
l)U>iness  of  competitor-  were  kept.      Iwo  or  three  witnesses  who 

bid  (harge  at  New  N'ork  of  thesali'sof  the  various marketing 

companies  in  different  parts  of  the  country  :'.dmitted  after  muc  h 
questioning  ih.it,  from  the  (eiitral  otVices  of  those  companies  in 
other  places,  reports  oi  competitive  shipment-  were  .sent  to  them 
,it  Xew  York;  but  they  at  l'ir>t  dinied  knowledge  as  to  what  became 

of  -uch  reports  after  tin  y  had  once  examined  lliem.    ( ,  vol.  — , 

l)p.  f)70  ct  seq.;  —        -       .vol. — ,  p.  OSi.)     Thus ,  who 

ii.id  charge  of  the  sale     a  the territory  until  looo,  and 

later  had  chargo  of  thi  si'es  in  the  territory  of  the Com- 

p.my  and  the  T of  lov  a.  admitted  receiving  such  reports  from 

all  these  territories,  but  claimed  that  they  were  destroyed  from  time 
In  time,  and  that  he  had  none  except  for  a  very  recent  periiKl      He 

•  t>p,  til.  U.  6'.  V. Company.    for  l".  S.  Vol  |>i>.  5.'<^  y:. 


^■ffr 

-    --     ,.:^.i:^f-*W«.1 

-^             ;• 

332 


Inuvsiriai.  Combinations  and  Trusts 


suid  nothing  about  tluir  l)nn;:  turni'd  ovrr  to  ihf  statistical  depart- 
ment, as  suljseq.;entiy  a.ppeared  to  be  tile  case.     { ,  vol.  — , 

pp.  b-jQ-Sj.) 

Finally  it  was  learned  from  the  testimony  of ,  the 

selling  agent  at  \e"-  'Sork  for  the Company  of  Kentucky, 

that  the  reports  of  this  character  which  he  received  from  the 

of  Kentucky  wire  turned  over  to ,  who  had  charge  of 

the  statistical  department  at (vol.  — .  p]).  70()-io.j     The 

Government  linally  found  that ,  under ,  was  then  in 

charge  of  this  statistical  dejiirtment.  He  was  called  as  a  witness, 
and  admitted  that  such  reports  of  competitive  shijiments  were 
turned  over  to  his  oflke,  and  that  from  them  he  conijiiled  general 
statistics  showing  the  volume  of  competiti\e  sales  in  each  general 

marketing  territory  of  the  T Company,  and   al-o  in  its 

smaller  subdivisions,  and  in  the  principal  town-  throughout  the 
United  States.     { ,  \o\.  — .  pp.  .S.'g  sj 

The  Government  secured  from "s  otTice,  and  introduced  in 

evidence,  copies  and  extracts  from  these  records  showing  the  vol- 
ume of  compel  it  i\e  i)usiness.  (I'etitioniT '■'  K\hii)its  ^S;  oo,  vol. — .1 
It  also  procured  from  the  \arious  sales  agents  having  their  head- 

(]uartersat iianuly, ,  represi-nting  the of  Iowa 

and  the Company; ,  representing  the of  Ken- 
tucky;   ,  reprcs(  tiling  the  of  Indiana;  -    — ,  rejjresenting 

the Company;  and  .  rei)reseiitiiig  itie  ot  \  'w 

Jersey — the  current  reports  received  by  them  from  their  several 
companies  showing  individual  shij)ments  of  comiKtitors,  and  aiso 
summaries  thereof  showing  the  total  competitive  business  for  cer- 
tain recent  periods  of  time.  Co]>ies  and  extracts  of  some  of  these 
records  were  put  into  e\  idence,  and  ((institute  Petitioner's  Kxhibits 
31  :,  ;,!(),  ,^:i).  v»i.  vt-.  ^■^^.  U4.  .vS.v  ,v^4,  and  ^55  (vol.  -).  To 
illustrate  the  form  of  tin  se  reports  of  competitive  shipments,  we  call 
attention  to  I'etitioners  Kxhibit  ,u ^  (vol.  — ,  |).  700).  which  is  a 
list  of  shipments  of  —  l)y  competitors  in  the  territory  of  the 

Comjianv     Rocky   Mountain  States)  during  certain  months 

of  i()07.     The  tirst  column  (ste .  vol.  — ,  pp.  ()S7,  7^())  sho.»s 

the  date  of  the  shipment,  the  second,  the  consignor;  the  third,  the 
fuiint  of  origin;  the  fourth,  the  consignee;  the  lillli.  the  point  ot 
destination;  and  the  other  columns  the  character  and  amount  of 
in  the  shipnu  iit. 

Petitioner's  Kxhibit-  v~^7-,^oo,  whi(  h  are  the  summari/cd  record- 
proUuctd  by  ,  allow  how  comi)lete  is  the  s^suni  of  keepiHb 


Trust   Mkthcjds 


333 


track  of  competitive  business.  They  cover  every  marketing  terri- 
tory of  the  T Company  in  the  United  States,  showing  the 

\()lume  of  business  done  in  such  territory  by  theT Com- 

jiany  the  volume  done  i)y  in(!e[)enilent  concerns,  and  the  corre- 
sponding,' percentaj^es.  They  also  give  similar  tif^ures  for  the  smaller 
marketing  districts  in  which  the  larger  territories  are  divided,  and 
likewise  in  many  cases  gi\e  se])arately  figures  for  the  main  stations 
and  for  the  substations  under  such  main  stations.  W'-  have  already, 
in  discussing  the  relation  of  the  extent  of  comiKtition  to  the  ])rices 

charged  by  theT Company,  presented  these  percentages 

(if  C'lnpetitive  business. 

and  other  sales  agents  who  proiluced  these  papers  testified 

that  they  did  not  know  how  this  information  regarding  competitive 
shipments,  which  came  to  them  from  the  head  otTices  of  the  several 

(umpanies,  was  originally  firocured  by  those  offices. ,  vol.  — , 

|K  O71;  ,  vol.  — ,  p.  0S7;  ,  vol.  — ,  p.  7CX); ,  vol.  — , 

pp.  758,  759; ,  vol.  — ,  j>p.  81S-.S25.)    None  of  them  directly 

totified  that  they  knew  that  the  reports  did  not  come  originally 

from  railroad  employees,  though  said  he  had  been  assured 

they  did  not.  (Vol.  — ,  p.  0S7.)  In  the  Missouri  case  in  i')0(),  how- 
ever, C.  P. ,  general  manager  of  the Com[i.iny, 

practically  a(hnitted  that  that  company  got  such  information  from 
railroad  employees,  and  paid  for  it  (vol.  — ,  pp.  11C9-11.) 

GROUP  4 

Exhibit  i 

EXPI.nsn  1  S    TRADE  ' 

O.  T  will  ask  you  whether  or  not,  if  you  know,  there  was  ^ny 
'(•ntest  inaugurated  against  tbr  King's  (Ireat  Western  Powder  Co. 
I'V  the  .assoeiated  companies,  in  which  you  took  part  and  assisted? 

A.  I  was  --ent  to  Cinciim.ili  by  The  Ha/..ird  Powder  Co.  i)y  di- 
re(tion  of  K.  I,.  W'heeUr,  the  pre'-idenl.  when  a  branch  ofTice  was 
I  -t.itili^hed,  and  he  told  me  the  chief  part  of  my  work  would  be  the 
I'dduding  of  a  light  against  the  King'>  (Ireat  VV("^terii  I'owder 
<"".  Mr.  Wheeler  w.is  then  \ice  president,  .md  not  ]  resident,  as 
I  have  just  -tatdl 

'Op.  (it  r  >  v.  /•.'.  /.  liti  I'lml  (/(•  \rmours  and  Compiiny.  Tostinony  nf 
K.  S.  \V;uiiUII  I'd  Rw.  Testimony,  \'o\.  I,  pp.  <>()  IT.  Tht'  ii\>tan(i'  Kivon  lure 
i  t  ikin  from  the  p(ri(vl  when  the  explosives  tr.uie  was  op«"r.Ttin«  iinilir  i  [xi'ilinn 

•■•iiHtil  , 111(1  bflori'  (he  ( (m.^i'liilalion  inio  the  pre>'  iil  loiiil  iti.ition       I  M 


334 


Industrial  CoMniNAiioNS  and  Trusts 


Q.  What  did  you  do? 

A.  1  opened  an  office  at  Cincinnan.  The  price  of  rille  powder 
was  then  held  at  S').25  per  keg,  less  a  rebate,  or  discount,  to  city 
trade,  of  5  per  cent,  say  S.v()4  net.  1  opened  the  fight  by  redueiii;; 
the  price,  on  Mr.  Wheeler's  instructions,  to  $5.80.  I  made  us  nun  h 
trade  as  I  could  at  that  figure. 

Q.  State  whether,  if  you  know.  The  Hazard  Powder  Co.  had  any 
trade  in  that  locality  at  that  time  at  all? 

A.  It  had  a  very  small  trade  throughout  that  section  of  the 

country. 

O.  Who  made  the  t'lrst  cut  in  price,  if  you  know? 

A.  Tne  Ha/.ard  Powder  Co.  That  was  on  rifle  powder.  Then 
had  been  a  tight  in  progress  t)n  blasting  powder  before  that  tinu  , 
but  the  King  Co.  had  only  recently  commenced  the  manufacture  01 
ritle  powfkr. 

Q.  Who  took  the  trade,  if  you  know,  on  that  price? 

A.  The  Hazard  Co.  took  the  most  of  the  trade  of  the  city;  ttu 
merchants. 

().  How  was  that  cut  met,  if  you  know,  by  the  King  people,  i' 

at  ali:^ 

A.  It  was  met,  within  a  day  or  two,  by  Mr.  John  King  himseli, 
who  came  to  the  city  and  made  a  lower  price.  The  price  was  see- 
sawed between  us  at  al)out  ro  cents  per  keg,  every  few  day--,  until 
the  price  had  gotten  down  to  about  S3. 75  or  S4,  when  I  was  allied 
to  New  York. 

O,   ]W  whom? 

A.  By  the  Hazard  Powder  Co.,  or  the  officers  of  The  Hazard 
Powder  Co.  for  a  conference. 

Q.  Witli  what  person  there  did  you  have  a  conference? 

.\.  R.  L.  Wheeler,  who  was  the  acting  head  of  the  company, 
directing  tlu'  busiru'ss. 

Q.  State  what  that  conference  was? 

A.  We  discussed  the  situation  at  Cincinnati.  He  expressed  ;i 
desire  t^.  Iioli'  the  tnide,  even  thougli  the  price  might  go  very  much 
lowtT  than  we  were  then  making,  ar.d  a^ked  mv  opinion  as  to  the 
best  means  of  (h^ng  this;  and  I  rcuimmended  a  pki-i  that  I  thought 
would  l)e  ctTective. 

().  Wliat,  if  .mything,  v  i  ;<'  you  instructed  to  do? 

A.   !  had  guieral  in-.lruaion^  to  Uuuke  a  price  lower  than  any 
that    had   been    cjuoted    in   the   city,   to  the  city   trade   in   tin 
cinnati. 


Trust   Methods 


oj>.") 


Mr.  Graham:  Will  you  state  what  the  instructions  were,  instead 
n|"  >ayiii.^  "1  liad  {j;eneral  instructions?" 

().  Stale  the  specilic  instructions  received.  By  whom  were  they 
j,'iven? 

.\.  R.  L.  Wheeler. 
By  Mr  (Jraham: 

(,V  What  did  he  say? 

.\.  He  instructed  mc  to  cut  the  price  -till,  either  lo  or  15  cents 
a  ke^,  with  a  guarantee  to  each  customer  to  vhoni  1  ^ave  the  cut 
jirice  that  this  should  he  lo  cenl>  per  ke^  lower  than  any  price  the 
Rinj^  Powder  Co.  would  make  to  tlum;  and  when  the  King  Co. 
ijiioted  a  [trice  to  a  customer — 
By  Mr.  Scarlet: 

(,>.  What,  if  anything;,  was  done  under  that  instruction? 

A.  I  carried  t!icm  out  exactly  as  they  were  p'ven  to  me. 

',>.  i  low  low  did  the  price  j^o? 

.\.  The  price,  to  the  irreattr  jtart  of  the  trade,  went  as  low  as 
•^:.:s  l^-T  keg  on  ritle,  although  I  made  some  sales  at  S-M5  and 
'J.  10. 

<J.  What  was  the  price  of  powder  outside  of  the  territory  in 
Ahich  this  contest  wa>  going  on,  if  you  know? 

A.  In  the  New  England  State>,  tlie  Eastern  Seaboard,  the 
extreme  Western  States,  the  full  li^t,  S6.25,  was  maintained  on 
rillc  powder. 

EXHUUT  2 

STANDARD    (UI,    COMPANY  ' 

Prke  of  wakr-uhilc  ilhim'nuilin^:,  oil  ^nul  nuir^ins.  on  October  /j, 
j(j()4.  by  spfiijird  towns  IhroH'^hnut  tin   I'ni  ■  I  Statcs.- 

(Cl:.Nrs  PI  K  (.\LLUN.) 

North  Atlan  nc  States. 


Maine: 

I''irll:ind  .. . 
N'  iv  Ham|)shire: 

Nashua  .  . .  . 


D.:..  If  •/ Vr  cent  of 

Price.       Margtn.       ^j.  ,-,■    ■' 


o 

4-7 


'  »[>. « it,  Stimliinl  Oil  Company  v.  U.  S.    Brief  for  U.  S.  vol.  2.  pp.  4  .  •-4.^,6. 
I'riccs  thai  imliailc  loss  arc  merely  printed  in  n d  ink  in  original.      In  fol- 
lowinR  tables  minus  signs  are  us'-d. — Ed. 


i 


llr 


if 


ii"- 


Industrial  C'ombinatk^ns  and  Trusts 


(CF.NTS  pi;k  gallon.) 

North  Atlantic  Stati.s.— C()K//n«e<^. 


Prk 


Vermont: 

Burlington 

MassacViuM'Us: 

Rostdn 

I  all  River 

Springfield 

Wc.rctslcr 

Connecticut: 

fhirtfor.l 

Vw  London '°°° 

Kliode  Island: 

I'r.n  iik'nce 

Nrw  Nork: 

Hiimhamton 

HulTalo   I 

Xfw  York '°-^'^^ 

I'cnnsvlvania: 

Harrisburi; ,      '°>° 

I'hila(l.-l!>hia !        «-°° 

rilt^hurg I        ^'^^ 

llcl.iwarc: 

Wilmington 

Nrw  Jcr^fv: 

Ni'wark 

Trenton 

J cr-^i  y  City 

'  Include--  city  and  its  substations, 


10. oo 
II.OO 

10.50 

8.00 
8.00 

Q.OO 


10.00 

o-.io 
10.00 


8.50 

1 1.00 
Q-.SO 
10.04 


P,r 

cent  ri 

M.irgin. 

com 

petition. 

1-54 

1.0 

8; 

ii-.l 

2.J5 

0 

—  .88 

21.7 

.08 

5-° 

.18 

21.7 

1.61 

2S.9 

T.CX) 
2.01 

2.47 
.28 
.87 


2.(10 
•S3 

2..iq 


3<)  1 

iO,,' 

8.(1 

"17.6 

,,2.8 

1  S.'i 

■1;,: 


((■i;nts  ri-.R  c.  vt.i.on.) 

South  Ati.  \ntic  St\tks. 


i     Price. 


Marvl.md  and  |)i-trict  of  Columbia: 

Ualiimiire 

rrediritk   

Washington,  D.  C 

Virginia: 

Norfolk 

Ri(  hniond 


8.50 

10.00 

8.50 

Q.50 
8.00 


Uiirc'/ii. 


.09 

1.70 

.18 


l\r  cent  V] 
I  ompcttiion. 

I  16.5 


.68  29-f 
^.27     I  "-^ 

"  IVlitioncr's  Kxhil.it  (.sTlTin  error  in  showing  this  as  a  protU.  T^;''^-^}"^' 
from  the  records  of  the  Standard  Oil  Company  i.elitioner  s  I.xh.bit  y)U  frem 
which  K.xhibit  Oji  was  compiled,  shows  it  as  a  loss. 


[It 


Trusi   Mi  thods 


337 


(cents  l-ER  GM.LON.) 

South  Atlantic  States.— Conti nucd . 


\  iririnia: 

Roanoke  . . . 
\\   -I  \irf;inia: 

t'harlfslon  . 

Wlu-i-'ling.  . . 
-ih  Carolina: 

Wilmington 

Kak'igh  .  .  .  . 
^  iith  Carolina; 

Columbia  . . 
( icorgia : 

Atlanta  . . . . 

Savannah  . . 
Ilnrida: 

Jacksonville 

Tampa 


Price.        Miirgin. 


lO.OO 

9-SO 

II. oo 
I2.00 

13.00 

13.00 


13.00 

MvSO 


Fir  cent  of 

rompi'.ition. 


:.2g 


2.S6 

0 

I  .tj(> 

12.2 

I.QQ 

I.I 

1.50 

2.27 

0 

1.1)8 

0 

2.48 

1-7 

3.10 

39 

.vg3 

("cents  per  r.\u.os.) 

Xoi  "II  Centr.xl  St.vtes. 


Price. 


Ohio: 

("intinnati.  . . 

Ckveland  .  .  . 

Columbus.  .  .  . 
Imii.ina: 

I'.vansville.  . . 

Indianapolis.  . 

South  licnd.  . 
lllinoi>: 

Chicago 

l)t'c;Uur 

Jnlid 

Mil  Itigan: 

Detroit 

Calumet  .... 

('■rand  Rupids 
Wi-ionsin: 

l.a  Crosse  .  .  . 

Milwaukee  . . 

i  .ail  Claire  . . 
.Minnf>ota: 

Duluth 


7- 
7- 
Q. 

<)■ 

8. 

10. 

8. 
9- 
9- 

8. 

12. 

9' 

9 

8, 

10. 


00 

00 

50 

00 
SO 
00 

50 
SO 


SO 

SO 

00 
SO 
75 


8.50 


rgin. 

Per  cent  of 
competition. 

1. 00 

45-3 

.10 

1           11-7 

1.72 

2-3 

•OS 

29.0 

.12 

22.0 

1.90 

0 

•.S6 

1J.7 

.08 

12.9 

•73 

1          '8.5 

.24 

i7^6 

2.40 



1. 14 

1              0 

j 

•17 

'         38.6 

■65 

38^6 

1.36 

.... 

-.88 


9-9 


338 


I^•UU^lTRI.•\L    CoMiUNATIONS    ANi)     TiaSTS 


(CKNTS  i'i:r  cali.on.; 
North  Central  States.— <1'o«//«mcc/. 


Minnesota: 

Minncapiiiis 

Mankal" 

I.i-.vLi: 

Clinton  

Cnlar  Falli 

I)cs  Moinrs  

Missouri  (not  in^lu<lin^;  W  attrs-TiercL'  Tfrri- 
tory): 

Kansas  City 

St.  Joseph 

Kan.-a-: 

Leavenworth   

Korl  Siott 

Wiriiila 

Nebra>ka : 

Omaha      

Ha>lin'^> 

I-'reniont  

Xorth  Dakota: 

I''arf;o 

South  Dakota: 

Huron 

Sioux    i-  alls 


Price.    1  Margin. 


9SO 
11.50 

to. 00 
12.25 
10-75 


10.00 
11.00 

10.50 
12.00 
10.00 

10.00 
13.00 
12.00 

1350 

I4-.SO 
I  2.00 


.24 

2.24 

•17 

2.10 

■53 


.48 

i.gS 

.48 

•41 
1. 40 

145 
2.10 


•3.S 


Per   (cr.t  ,/ 

luinpctition. 

41.S 
0 


4 1. 8 


24,2 
0 


32.1 
21.7 


Kentucky: 

l,ouis\ille  .  . . 

Lexington.  .  . 

Tadueah  .  .    . 
Tennessee : 

ChallanooKa. 

Nashville 

Mem|>hi^ 
.\!.i!)am:i: 

Hirniinu'h:ini. 

Selma 

lluntsville. 


(cents  per  c.m.i.on.) 
South  Cintrai.  States. 

(Extlusivi' of  Waler^-l'ieri  e  territory.) 


Prh 


8.50 
1 1. 00 
11.50 

13.00 
1  2.00 
10.50 

;.oo 

..  ->o 
1     ;o 


Margin. 

Per 
conn 

cent  0; 
Milion 

— 0.3S 
I -.54 
1.85 

1(1.1 

'•73 

2. 1 1 

.18 

0 
27  '' 

2.46 

.'.oO 

1I,(! 

sn 

... 

Trust  Mkthods 


(CKNTS  PLK  GALLON.) 

South  Central  States. — Continued. 


359 


Mi--i---i|>[)i: 

J.nkson 

Loui>ian;i: 

N\\v  Orleans 
Halcin  Rouge 


Montana; 
lUiltc. 

(llCVC! 

(>,!,, rado: 


Denver  .  . 
I.eadville. 


\i  A  Mexico: 


All: 


r.jUerquc 


U,i-1, 


'.lit  Lake  City. 
iimton: 


Seattle. 


Spokane 


Orc^ron : 


■rlland 


f.lllfn 


I.i>..  Anpcles 
Oakland      .  . 


.'^arramenlo 
San  l''raneiseo 


Price.        Margin. 


Per  c.:U  ,:/ 
conipelitiiiii. 


«3SO 

9SO 

II.OO 


2.1  I 

-I -.5,1 


(cents  per  gallon.) 
Western  States. 


Price. 


23.00 
18.00 


16.00 


2,5.00 


i.SSo 


15.00 


7  so 
12.50 
13.00 

12.00 


.\f 


(irgin. 


Per  ce-:t  i.f 

t'tmprtiUoii. 


'0.8 


"O.f) 


,V.3Q 

,S47 

6.48 


4.00 


4-17 

6. to 


4.12 


-3.16 


•0.8 


2.46  i 
2.4.S  ' 
1-7.? 


■I'v4 
'  0.3 


Includes  city  and  its  substations. 


KXIIIIUT 


.\ 


COMPAXY 


The  Government  alleges  that; 
Mr.  G \.  G tcstiticd  that  immuJiatily  ht'fnrf  the  G s 


\(  n  ready  toRointo  tht 

'  Up.  ,:it. 


hu 


siiu'ss.  in 


the  lultiT  part  ol"  iSgq  (ir 


i  /JIM  h.m  v  \' 


f,,r    I- 


\-..l 


340 


ImU-STRIAI.    CoMIilNAlIONS    AM)   TrUSTS 


early  in  i  lOo,  the  Ijottuni  (h-djipcd  out  <il  the  prices  at  .Ml^any  and 
tliL'V  pra'-'icaily  ■Xvl  no  business  for  about   two  yjars.     i\'()l. 
p.  194"/..      ilis  recollection  i.-,  that  the  price  went  down  from  i: 

cents  to  6-4  cents  u'tiinatLly.    Mr.  T.  J..  G says  that  the  T 

reduced  the  price  to  Ci  cents  or  (i-\  cents.  When  the  G s actually 

got  started  al   .\lbany  they  sold  oil  as  low  as  ~-^  cents,  but  did 

not  meet  the  low  prices  made  by  the  T .     [\'o\.  — .  [).  iSi(j. 

The  marked  difference  between  the  prices  at  Albany,  where 
there  was  a*  live  com[)etitii)n,  and  the  prices  in  other  cities  hi  New 
York  is  vividly  shown  in  Petitioner's  K\hil)it  635,  which  compares 

the  T 's  prices  of delivered  at  Alb.my  with  the 

prices  of  the  same  grade  of delivered  by wagon>  at  Xi  ,. 

York  City,  month  by  month,  from  i()02  to  iqof),  and  which  m 
shows  till  margins  of  prol'it  or  loss.  The  price  at  Xew  York  ought 
normally  to  be  lower  than  at  Albany,  as  Xew  York  is  at  the  vert- 
seat  of  the  largest  relineries  of  the  T .    The  exhibit  shows  that 

from  iqo2  to  iqo4  the  price  at  .Albany  was  m()>t  of  the  tinu  i  cent 
per  gallon  lower  than  at  Xew  ^'o^k•,  that  in  11)05  it  wa->  fro:n  i  to 
3  cents  lower  than  at  Xew  York;  and  that  in  i()06  it  v.\  s  for  eight 
months  2.5  cents  lower,  aiid  during  the  rest  of  that  year  3  cents 
lower  than  at  X'ew  ^'ork.  The  dilTerence  in  thi'  ji-rolit  per  gallon 
shown  is  about  the  same  as  the  ditTerence  in  the  selling  price.  In 
1902,  during  four  months,  the  T— —  was  selling  at  Albany,  at  a 
loss  of  0.31  cent  per  gallon,  while  there  was  a  prt)l"it  in  X'ew  York 
of  from  0.54  to  0.70  cent.  During  mo.st  of  1905  the  profit  at  Albany 
was  o.:o  cent  per  gallon  or  less,  and  in  two  months  there  wa>  a 
loss;  while  in  the  same  months  at  X'ew  York  there  was  a  profit 
ranging  from  j.09  cents  to  2.S4  cents.  In  the  last  four  months  of 
1906  there  was  a  loss  of  o.'.?  cent  per  gallon  at  .\ibany,  and  ,1  profit 
of  2.74  cents  per  gallon  at  Xew  Vork. 


X X ,  a  storekeeper  of  .Mbany,  testified  that,  after  he 

had  been  ouying  oil  from  the  G s.  K ,  a  salesman  for  the 

T ,  olTered  him  a.  ])rice  onedialf  ciiit  below  the  G s'  price. 

This  offer  was  made  in  a  conversation  in  which  K indicated 

the  price  for  v.liich  he  would  sell by  raising  up  tivc  fmg    ■  on 

one  hand  and  then  or.e  finger  and  half  on  the  other,  indicat'  1^  0-5 
cents.    This  price  was  to  Ije  made  by  means  of  a  rebate  and  .\ 


says  that  K- 


told  liim  that  tickets  would  be  made  out  .it  th'' 


regular  price  and  the  amount  of  the  cut  returned  to  him  r-ub^r 
quently.     ( ,  vol.  —  ,  pp.  1032  ^7.) 


Trust  Methods  341 

K .  called  b_\   ihe  defendants  (vol.    -,  p]).  7,^7-43),  admitted 

Ml, it  he  used  his  lingers  as  X had  sai<l,  hut  claimed  that  in  do- 

iiiir  -o  he  was  simply  trying  to  lind  out  the  price  that  X    —  was 

[',    ing  the  CJ s.     When  the  question   was  first  put  to  him 

wliether  he  had  otTered  oil  to  X •  at  a  cut  jjrice  he  did  not  answer 

no.-:  ■  ive'v  but  said  he  couid  not  remember.  Alter  being  badgered  by 
ckndants'  counsel  he  finally  said  he  had  made  no  such  otTer.  An  ex- 
niinationof  this  witness's  testimonyin  detail  will  satisfy  the  court 

that  X 's  version  of  the  matter  is  correct,  and  nt)t  K "s. 

K _li ,  a  grocer  at  Albany,  testified  th.it  after  he  had 

been  buying  from  the  G limthers.  the  T 's  tank-wagon 

ilriver  one  V ,  made  hini  a  proposition  to  sell  him for  six 

months  at  2  cent>  a  gallon  Ie>>  than  the  prevailing  price,  the  2  cents 

to  be  paid  as  a  rebate;  that  the  T afterwanls  nfused  to  keep 

this  agreement,  and  B deducted  the  an    unt  of  rebate  to  which 

he  was  entitled  from  a  bi'l  for  candles  whith  he  owed  the  T , 

and  the  T never  attempted  to  enforce  collection  of  the  amount 

-0  deducted.     (Vol.  — ,  pp.  i()7o-72.) 

V ,  called  by  the  defendants,  said  in  substance  that  he  had 

(flayed  a  trick  u[)on  1] ,  that  he  told  him  that  he  was  going  to 

u'ive  him for  2  ceiits  below  the     arket  price,  when,  as  a  matter 

lit  fact,  Y knew  that  the  market  [)rice  was  lo  be  reduced  on 

the  following  day.     (Vol.  — .  pj).  S3S-4J.  1 

GROIT  s  ' 

Exmmi    I 


(  RICDIT    AGKNCIliS  = 


The  Government  alleges  that; 
Throughout  the  period  fr<im  about  1004  to  the  present  time,  the 
tip.ancial  credit  and  business  standing  and  classification  of  

'  In  the  various  wholesale  and  retail  dealers'  assoLialions  the  restraint  of  trade 
mv(.lved  is  somewhat  dilTercnt  than  that  in  other  types  of  conibinatinn.s.  It 
ri  Nilves  itself  into  three  main  objects;  first,  to  jirevetit  shi[)m'jiits  from  manu- 
facturers and  wh(}les;ilers  direi  t  to  consumers;  second,  to  confine  shipments 
I'ror^  manufacturers  and  wholesalers  to  those  who  are  regarded  as  lenitimate 
rci.i.i  dealers;  third,  to  confine  ihe  trade  of  the  retailer  to  his  lefjitimate  terri- 
t'try.  The  manner  and  methods  of  .iccomplishin:;  Miese  three  ohjects  is  through 
J-  more  or  less  arbitrary  system  of  ■  lassification.  failure  to  conform  to  ethical 
-;andardsof  business  has  led  to  attempts  to  force  the  recalcitrant  into  line  by 
uriims  methods.     Cf.  Chap.  XII,  Groups  6  and  7. — Kd. 

•I'liital  Sldlfs  of  America  v.  — ■ auJ  others.     Tetition,  In  Kquity, 

In  the   Court  of  the  I'nitcd  States  for  the  District  of .  no.  is-ib. 


34- 


iMnSlRlAI.    Ci)M131NAlinNS    AM)     TrLSTS 


dc'akr>  is  reported  in  certain  credit  ijooks  reciu.'nizcfl  by  all 

dealers,  ineludint^  .he  defenilant>  herein,  as  estahli>hiMU  the  credit 
ratin;:,  hu.-ine--.  >taiiiiin.i,',  anil  classification  oi  said  I'ealers  lur  all 

the  [(urjKi.-o  of  tile trade.     These  said credit  ai^'encie.--  are 

known  to  the  lr,ide  a>  the  •"lilue  Hook"  and  the  "Red  Hook." 

The  '■  Hlue  liook  '  i>  owned  and  published  at  .Mi--ouri,  by  the 

—  Credit    Manut'acturers'  Cor[)orati(jn,  a  cor|)oration  ul 

the  Stale  of  \'ir;;inia,  the  stock  of  which  is  owned  or  fully  controlled 

bv  the Manufacturers'  .Association,  wliiih  association 

is' compor-ed  of  tiftem  or  more  of  the  larj.;e>t  manufacturers'  a>.>(> 
ciation^  throujjhout  the  I'nited  .States. 

The    "Red  Book"  is  jjublidied  at  ,  Illinois,  by  the  's 

Credit  .Association,  a  c(.'ri>oration  of  the  State  of  Illinois,  and  i^ 
similar  in  its  form  to  the  •-aid  ■'Hlue  Book,"  and  is  used  for  the 
same  purpose. 

The  ratin.u's contained  in  -aid  '"  Hlue  Book"  and  said  "Red  Book" 
are  I'lxed  by  properly  designated  otFicers  of  the  said  Credit  Manu- 
facturers' Corporation  and  said  Credit  .Association,  resp  ctively. 
who  have  been  for  many  yi'ars  la>t  pa>t  and  now  are  in  direct  com- 
munication by  corresijondenie  with  the  defendants  herein, 

, .  and ,  relative  to  the  listing  and 

standin.i;  of  retail  dealers  in  \arious  jxirts  of  the  territory  covered 

a.--,  aforesaid  by  the s  .A^M)ciati*)n.     l)urin,t,'  said  period 

said  ofi'icials  of  said credit  a;j;encies  have  >ent  advance  printed 

proof  sheets  of  new  i-sues  and  corrections  of  said  credit  books  to 

the  defendant. ,  as  well  as  to  ofTicials  of  other  retail 

dealers'  a>sociation>,  .iiid  in  piursuance  to  said  conspiracy  said 

—   has  ordered,   directed  and   made  various  chanpcs 

in  said  credit  books  by  way  of  eliminatini^  the  names  of  dealers 
whose  businos  did  not  conform  to  the  standards  of  classificatinii 

arbitrarily  ado[)ted  by  the  member.-  of  the  said "s  .\.-Si)- 

ciation  as  hereinbefore  described;  and  in  the  said  credit  books  or 
by  s[)ecial  reports  \arious  dealers  have,  at  the  solicitation  and 

instigation  of   said  —  and  others  been  designated  as 

contractors,  cooperative .  mail-order  houses  to  distinguish  these 

from  what  is  accepted  by  the  members  of  said 's  .Asso- 
ciation as  legitimate dealers  entitled  to  purchase  at 

wholesale  prices.  In  the  key  to  nui'dters  shown  in  the  said  "Red 
Book ''  there  appears  as  a  I'art  of  the  plan  of  arbitrary  classification 
as  aforesaid  the  following: 

Oj.  Regarded  as  consumers  by   retail   as.-ociation. 


Trust  Mi, moos 


343 


III  I'lirthiT  pursuance  ti)  said  C()n>[)iracy  and  comliinatioii  during 
iiif  piridd  aforr^aid,  a>  was  at^rcod  l)t't\v(.rn  the  publi^-hcTs  of  said 

•■  Red  I5(i()i^"  and  the  secretary  nienil)ers  of  said ,  JUireau 

iif  Information  that  in  consideration  of  beinj;  indemnilied  on  ac- 

o'unt  of  any  possiljle  damage  suits,  said  publishers  should  li>t 

.ii.ilcr.-,  oi)erators,  contractors,  and  consumers,  a.>  aforesaid,  in 
.Kinrdance  with  the  classification  lixed  by  said  orf^^'anized  retail 
dealers'  a>sociations. 

riie  jiurpose  and  eflect,  well  known  and  intended  by  defendants 
lurein,  in  thus  eni[)loyins^  the  said  credit  a.uencies  to  lix  this  arbi- 
trary classification  of  the trade,  as  aforesaid,  has  been   to 

deprive  the  contractors  and  builders  and  the  coo])erative s  and 

the  mail-order  houses  and  t;ther  consumer^,  as  aforesaid,  of  the 
rJL'ht  to  buy  freely  from  manufacturers  and  wholesalers,  as  herein- 
before more  particularly  alleged. 

Exhibit  2 


REPORT,   COMMITTKE   ON   TRADE 


RELATIONS. 


UF.ALKR  S   ASSOCIATION  • 


,  March  /,  i^^gg. 

In  making  this  report  of  the  result  of  the  first  year's  work  of 
the  committee  on  trade  relations,  we  wi>h  llrst  to  refer  to  the  events 
■■  hi(  h  led  up  to  the  creation  of  this  conmiittee.    In  February,  iSqS, 

iirtain  wholesale  dealers  in  North  ,  realizing  ilv  grt\it  loss 

they  were  suffering,  both  in  volume  of  trade  and  percentage  of 
profits,  caused  by  the  competition  of  a  ch'ss  commonly  known  as 

scalpers,  called  for  a  general  meeting  of  the 's  Association 

to  discuss  the  fjuestion.  The  result  was  the  passage  of  a  resolution 
Cdiiriemning  the  business  of  the  scalper  and  an  agreement  of  all 
members  present  at  the  meeting  not  to  sell  to  any  scaljjcr  who  was 
reported  to  be  selling  to  a  class  of  trade  not  legitimate. 

\;  the  last  annual  meeting  of  this  association  at ,  a  letter 

'.'.■I-  re(ei\-ed  from  the Trade  .\ssociation.  presented 

iiv  Mr.  J. .     This  letter,  after  rel'erring  to  the  losses  occa- 

-i'tMij  both  to  the  wholesale  and  retail  dealers  by  scalpers,  says: 
'■  Ihc  remedy  for  this  evil,  in  our  ojiinion,  lies  in  concerted  action 
hv  tjie  retailer  and  wholesaler  against  the  offenders,  and  to  this  end 


'  Vnited  Sl:ilrs  of  Awrrir.i  \ . ■ 

"i,.l  I'riiiioii.  In  tlic  —    -  Court  ol  ihe  Unit(.-( 
-    ,  K.xhibil  E,  pp.  ;6-8o. 


Dralrrs'  Associallou.    Orii;- 

Slalcs  for  the District  of 


* 


o44 


i\Ul>,rKlAl.    ('()Mlil\ATK)NS   ANU     I'l^'STS 


we  ask  you  to  appoint  a  comniitlct.',  with  power  tn  (.onfer  with  th'-^ 
committee,  to  see  th:.    united  aeli(jn  eaii  he  taken  in  the  nialter. 

The  result  was  that  tjy  practically  a  unanimous  vote  the  - — 

Dealers'  Association  e^tabli^hed  the  committee  on  trade 

relations. 

Unavoidable  delays  prevented  our  holdin.i,'  our  i';rst  nieetinj,'  until 
the  follow i Ml,'  July,  at  ulueh  time  there  developed  the  idea  that  the 
committee  on  trade  riUu  ions  was  to  act  as.icla>>if"icationeomm!tlee. 
Such  a  construction  would  positively  have  prevented  this  committee 
from  doin,u  anylliin.L,'  toward  the  intended  end,  t'or  it  was  readi'y 
seen  that  their  work  could  only  iie  >ucce>>ful  hy  conmuncinf^  after 
ciassii'ication  was  decided. 

One  of  the  ^'reatest  cause>  of  friction  between  the  wholesale  and 
retail  association-  in  the  pa:~t  ha^^  been  the  (luc-tion  of  classificalinn 
of  the  trade,  e;u  h  -ide  Likiiii;  the  >tand  il.;'t  to  them  helonctd 
the  rij^ht  to  cla-vify.  Kxidently.  then,  no  mutual  work  could  he 
done  until  this  ililference  was  (jvercome  by  -ome  agreement  be- 
tween  the Dealers'  .Association  ,ind  the  \ariiius 

retail  ortjani/ations,  which  would  proviile  for  ,tl;Milule  linal  classi- 
fications where\er  necessary. 

Our  tirst  niectim;  for  tiii-  purpose  was  with  the  committee  on 

wholesale  selliiiL,'  C(Ui^umer>  of  the Trade  .As>ocia- 

tion,  held  in  New  NOrk  Octobi  r  1 1.    The  result  of  this  conference 

was  the  adoption  l)y  the Trade  AsM)ciation  and 

the Dealers'  .Association  of  th?  following;  resolution: 

"Whenevir  ::  di--pute  as  to  ihe  classification  of  any  consumer 
is  concerned  the  chairman  of  the  committee  on  wholesale  selling 

con-umer>  of  thi' 'I'rade  A>-ociation  --hall  arranw 

for  a  joint  arbitration  between  said  association  .md  the 

Dealers'  .Association  by  a  committee  con-i-t'ii^  of  one  member 

of  the Trade  .A^Mieiation,  to  be  .ippointed  by  the 

(hairma'i  of  the  committee  on  wholesale  -ellinj^  consumer>,  and 

one  member  <if  th"  Dealer-'   .\>'^ociation,  to  be 

appoin'.ed  b\'  that  :i--oeiation;  .md  in  the  (a-e  of  disigreenient  by 
this  committee,  .1  third  member  of  -.lid  connvittee  shall  be  decided 
upon  by  tlu'  two  member^  alread}'  ser\iui;,  .md  the  deci-ion  of  this 
committee  shall   be-   linal  concerning  such  classiticalion,   it   beini; 

understood  lluit  lomcrns  decided  to  l)e and -h.dl  niAir 

be  held  a  legitimate  ruston'rr  for  tlu  wholesaler  to  sell.' 

I'p  to  the  present  time  the Trade  .Association  i> 

the  only  retail  ()rKani/.ation  that  has  jiositively  aj^reed  with  our 


I  ■ 


Tklsi   Methods 


345 


as'-ociation  for  joint   linul  classification,  but  our  committee  has 

ncf^otiated  with  the 's  I'rotective  Associatio.i  and 

the Dealers  Association  of ,  and  are  very  much  pleased 

to  report  that  after  a  conference  with  the  committee  on  trade  re- 
lations of  the Retail  Associatic/n,  in  which  plan  of  work 

as  hereafter  outlined  was  discussed,  we  received  the  following  letter 
frnn^i  them: 

,   —  — ,  I'ihruary  j,  iSgg. 

ClIAIRMAX   COMVITTKF.   ON'   TrADI     Rl.LATIONS, 

Dealirs'  Association. 

Dear  Sir:  It  is  a  plea>ant  ihity  to  inform  you  that  our  committee 
tip  trade  relations  a;j;reed  willi  yi>u  a-  to  the  ur<,'eiit  necessity  of  a 

movement  iiy  the  comhined trade,  as  discu^-^ed  at  our  informal 

conference  on  the  lir-t    in-tant.      Ilu      —      a.-sociation  can 

assure  you  of  their  I'arne.-t  coii])^ration  to  hrini,'  about  the  ends 
aimed  lor  on  the  broad  line>  oul lined  by  ourselves  at  the  conference. 

I  .ini  with  re>pect,  very  truly, 

— ,  Snrrtary. 

Our  \v  irk-  so  far,  therefore,  ha-  been  to  provide  a  plan  for  joint 
tin.d  cl,i.-.it"!cation. 

We  have  at  all  •inv,  -  reali/;d  that  this  was  but  the  fir-t  step 
to  be  taken,  and  in  all  onr  conferences  with  representatives  c^f  the 
retail  or;,'ani/ations  we  have  {li.-cussefl  the  next  work  necessary. 
Joint  final  classification  is  a  i^ood  nna  ure,  as  when  adopted  it  re- 
inoves  the  cau^e  of  friction  in  the  |);i^t  betwi'en  the  retail  a--ocia- 
tion  and  the  -  Whdlesile  AsMxiatinn.  lUit  without  further 
obligation--  on  the  uholoaler  and  rcl.iilcr.--  it  cannot  accomplish 
what  we  are  seekini;  to  attain.    .So  the  committee  r(Comnnnd>  that 

th<- Dealers'  Association  i)ro\idc  in  it^  by-laws  for 

theexpul-ioii  from  inniber-hij)  ot  all  membi  r-  who  --ell  the  trade 
that  is  jointl\  ( l.i--irii  d  .i--  not  leuituiiate  trade  for  the  whole.'^aler, 

and  that  in  nturii  for  tlii-~  atiion  b\  the Dealer--' 

.Asso'iation  <;//  nitiil  (/xilcrs'  assot  iations  provide  some  measure  to 
induce  the  memhcs  to  luix  their  stoi  k  onlv  from  such  uhole^ale  dealers 
(^  are  metiihcr^  in  t^i.nd  ^l.mdim^  of  the Wholesale  Association.' 

A  careful  consideration  of  this  plan  wt  think  will  convince 
everyone  that  thf  possibilities  for  pood  results  are  lar;:e  and  only 
limited  by  the  acti..n  of  all  in  interf-t.  The  —  Whole. .ilc  Asso- 
ciation can  not  acconipli--h  the  de-ind  roult  .iloiie.  nor  cm  the 
retail  association,  nor  i-  it  probable  tluit  both  together  can  entirely 
'  Italics  arc  the  editor's. 


34 


(J 


Lndustkiai.  COmiunatiu.n^  anu   Tklsts 


eliminate  the  competition  of  illej^'itimate  operators.     But  if  the 

wholesale  interests  not  now  memoiTs  oi  the Vs-^ociatioii 

will  join  throui^h  ihc  asMX'i.ition  in  ^aN'iiiu;  to  tlu'  relail  dealers,  \\V 
will  not  sell  to  anyone  who  seeks  to  injure  your  pro[)er  bu>ine."; 
and,  if  in  '"eturn,  the  retail  de.ilers  will  to  as  i^reat  an  extent  a: 

practicable  buy  of  the  members  of  the Wholesale  Association, 

it  seems  apparent  that  f^ood  result  ^  must  fallow. 

We  have  bet  ii  uk '.  in  this  i)ro[>or-ition  many  time-,  by  the  state- 
ment, ^'ou  can  not  jjcet  men,  tir->t,  to  [)romise  to  do  what  you  ask, 
and  mxt,  after  ])rom;>i:i;;,  to  carry  out  their  promises.  In  answer 
to  thi.^  we  ha\e  or.ly  to  >ay,  if  that  i'^  so,  then  .iboli-~h  your  coni- 
mittei'  on  trade  relati(jns,  aboli-h  );)ur  wholesale  and  retail  associ- 
ations, and  let  everyone  ro  in  and  plunder  each  other  to  their  full 

ai)ility.     liut   we  do  imt  bdiew  that   the  larj^i'  majority  of 

dealer--  are  -o  blind  to  their  own  interests  or  so  weak  in  their  de- 
termination a>  to  conn  to  ^lU  h  a  conclusion,  ami  --o  wf  ha\"e  i-fcoiiv 
mended  to  you  a  plan  which  we  trust  will  opi'U  a  discussion  tluil 
will  eventually  re-ull  in  a  victory  for  ])roper  busine^^  principle^. 

If  successful  in  tin-  work  --o  f.ir  oullinrd.  ilure  are  oiher  quotioii- 

for  the  Wholesale  Association  to  take  uj).     J'iir  icliolcsalcr^ 

tii-ddv  sujjrr  ti  loss  by  llir  action  of  soinr  Maniifiictiircrs  {who  do  no! 

operate  li'liolesa'.r )  /;/  sclliiif^  dim  I  to  ictdHrrs  a  portion  of 

llhir  product,  by  the  action  of  some  rrlailors  in  buying  from  surl; 
manufacturers  a  portion  of  their  supply,  hy  the  action  of  some  com- 
mission nioi,  brokers,  and  inspectors,  in  cndia'corin'i  to  do  a  husiiu^, 
-which  is  a  positive  injury  to  the  letiilimate  wholesiilers.  The  whole 
saler  is  just  as  much  a  necessity  in  the  trade  :'s  the  manuiacturer 
relail  dealer,  or  consimier,  a)!d  liis  bu-^iness  must  be  protected  from 
improprr  competition,  just  as  much  as  any  other  di'.ision,  to  the  enJ 
lliiil  ■:  proper  profit  >nay  accru  to  all,  consistent  with  the  amount  ei 
lapitab  eneriT}',  and  al)ility  employed.' 


ACRF.KMINt    111      lilt:    ASSOn A TION  - 

The  Govtrnment  alleges  tha': 

At  a  joint  meeting  held  in           Alan  li  i  .md  -,  iHqo,  of  dclegaa.- 
from  the -—  Trade  Associaliwn,  the — s 

'  !l;i!iis  in  this  paranr.iph  are  the  eflitor"^. 

•<)|>.    <il.    I'nitcd    .Stales   v. - 

Original  I'tlilion,  Kxhibit  I",  ()|).  80-81. 


Dcairrs'  .Issocialioi' 


'Ikisi    Mkthous 


347 


» 


i'rotictive  Associati(jn,  the  Retail  Dealers'  Association,  the 

Retail  Dealers'  Association,  the Retail  Dealers' 

Association,  the  Retail   Dealers'  Association,  the and 

Association,  the — 's  AsMiciation,  and  the  Asso- 
ciation of  Dealer.-,  wilh  the  numbers  of  the 

Dealers'    A.i>ociation,    it    was    unaninlou^ly    \'oted    to   adopt    the 
following : 


lir-t.    riiat    the 


Dealers'  Association  take  up 


and  fornuilate  rules  to  clas:^ify  the  tiade  into  sections,  as  follows: 
Manufacturers. 

2.  W'hole.-'ale  dealers  or  ai^ents. 

,5.  Retail  dealers  and  other  legitimate  customers  of  the  whole- 
sale trade. 

The  retail  trade  to  he  classified  according  to  the  rules  poverninc; 
such  trade  in  the  various  States  at  the  pre>ent  time,  jjrovided  that 
in  cases  that  may  ari^e  where  the  whoie>aler  .ind  retailer  do  not 
agree  before  a  sale  .-hall  he  effected,  the  matter  >hall  be  submitted 
to  a  conference  committee  com[H)sed  of  one  member  from  t^e  retail 

associatiiii    mtere.-tid,    one    member    from    the 

l^eulers'  .\--ociation.  and,  in  event  >>'.  tlu-e  two  not  beinf^  able  to 
aj^ree,  they  shall  dei  ide  upon  a  third  nuniber  of  the  ccjmmittee, 
and  the  decision  of  >uch  committee  sh.di  be  final. 

Second.  That  the 1  )e,der'i'  .Association  take  up 

and  consider  the  pronouiunl  and  icco^ni.'.ed  evils  from  which  both 
branches  are  sut'ferini;.  \  i/: 

1.  Salr^  by  nianufa(  turirs  and  wholi.-aurs  to  consumers. 

2.  Sales  by  brokers,  a^iiU-.  and  commission  men  to  consumers. 

3.  Sales  and  (|Uotations  by  the  so-called  retail  deah-rs  to  ccjn- 
sumers,  throuuh  ai^int--.  .md  b\-  nuthod<  used  by  the  wholesaler 
in  snlicitintj  tr.uie  from  the  retailers. 

4.  That  tin- I)ealer.--'  .\>-o' iaiitui  con  idcr  and 

•  leviso  a  plan  which  will  en;diK  thint.  with  the  coopiT.itiim  .)f  the 
retail  trade,  \'>  (  nntrol  all  such  mnc  ern-^. 

5.  Th.it    the Dealers'    .\i--oti.;ti(in    jjnivide    .1 

|>lan  whereby  ail  wholesale  dealers,  manul'aclurers,  conmii-sion 
men,  uKenls.  and  brokers  reported  bv  a  Slate  asM)cialion  for  selling 
to  tilt,  consumers  shall  be  reported  to  the  wholesale  irade  and 
mi'rafacturer-  .md  r((|uire(l  to  CDnfiuin  !o  lei^ilimale  rule-  of  bu-i- 
'.e-<. 

'h  i"i)llowinj»  n:.olution  was  also  adopted: 

That  't  i-  the  sen-e  of  thi-    mcetin"  that,  in  thi'  i'\cnt  m|  ilic 


.U<3 


L\DLhlKl.\l.    C  oMIU.N.vriUN'S    ANlJ     TkL'SIS 


Dealers'  Assoiiaiiun  (.Dinplyin^  with  the  reque^; 

adopted  here  to-day,  the  retail  dealers  will  pkds^e  themselves  »i 
far  as  possible,  to  buy  only  of  members  in  regular  ^landing  o;  the 
Dealers"  Association." 


1 


Exjiiiin  4 

REPORT  OF   TRADi:    Rl.l.ATTON   COMMITTEE 

*  *  *  So  the  first  year's  work  of  this  committei .  ably  assi.>te(l 
by  the  committee  on  wholesale  >ellin{^  consumer    •'■  the 

Tratle  Asscxiation  anil  their  secretary,  Mr. ,  has  n  -ulli.: 

in  creating'  between  the — Dealers'  Assoc 'itii..  arnl 

the  variou>  retail  dealirs"  a.-^ocialioii-  mentioned  'he  great  e- 
sentials  to  all  tra(K-relatii)n>  work,  namely,  coiilide     e  and  joirt 

acti(jn  ,  and  the  outcome  of  this  was  the agreement.    The  lir.-t 

work  which  the agreeinenl  calleii  for  \\a>  the  classilicalion  of 

the  various  branches  of  the  trade.  The  committee  thought  best  to 
temporarily  [)ass  subdivision>  .\<)^.  i  and  2  cf  section  i  and  todevoi: 
themselves  to  determining  what  was  legitimate  trade  f^r  the  whole- 
salers to  sell  to.  1  he  agreement  provided  that  t!ii>  biMncli  shoui! 
be  classit"ie(^  according  to  ;.he  rule-  governing  such  trade  in  the  va- 
rious States  ai  the  present  time,  with  a  jM-ovix)  l'(jr  settlenunt  by 

joint  conferenct'  of  all  cases  'vhere  the Wholesale  .\>M)ciatioi. 

classification  did  imt  agree  with  that  ni  the  lucal  retail  a>M>ciation. 

So  the  secretaries  of  all  retail  a— ociations  partio  to  the airree- 

ment  were  retjuested  to  notify  the  -ecretary  of  the \Vhole>aie 

Association  whenever  in  their  judgment  any  wholesaler  was  selling; 
a  trade  which  the  retail  a^-oci.aion  did  nut  con>ider  legitimate. 
rpon  reeei])t  ol   such  requot  the  secretary  ni  the  Wliole- 

-ale  .\ssociatinii  ]iri!\'ideil  a  cla-siticalion  comn:itti'e  lor  i  ach  indi- 
\  ;dual  ca^e. 

It  the  (leci-ion  <•!'  -luh  commit  lee  agrei  d  with  the  decision  of  the 
retail  a>>ociation  nothing  further  wa>  nece--ar)  e\ce|)t  to  record 
the  decision.  If  tin-  two  classification  coimnittees  disagreed,  each 
uetit  to  a  confereinc  coniiiiittec. 

We  feel  that  the  progre--  made  and  herein  repv)rled  i>  secure' 
and  on  a  (irm  foundatiuii,  but  we  particularly  call  your  attention 
to  the  further  requirements  of  the agreement,  so  the  subject 

'  Oj).  t  il.  I'nitfd  Slittci  cj  Amirica  v. Dealers'  Associution. 

Exhiljit  (i.  pp.  S:-83. 


■Hi:  '   I  ' 
7  ■      1  ' 


Trust  Mi;rHODs 


349 


nay  have  your  best  thought  and  udgment  and  that  this  association 
will  Li  ;rro\vinj;  in  its  ability  to  ^Tasp  and  intelligently  deride  ail 
questions  of  trade  rLlaliunr..    The^e  recjuirenunts  are: 

First,  'i'uit  we  extend  our  clas-itications  >c)  tliat  wf  will  cover 

::11  fh"  provisions  of  the  aj,'reenient,  and  imt  only  jointly 

■  !  ■  rmine  who  is  proper  and  le^ntimate  trade  lor  the  wholesalers  to 
■oii  to.  but  who  it  is  .  ijitiniate  for  tlie  retailers  to  buy  from;  who 
it  is  leg;  mate  for  the  manufacturer  U>  >ell  to.  and  to  estaljlish  a 
plan  for  recording  all  i)er-ons  engaged  in  any  form  of  scalping. 

Second.  We  will  again  refer  to  that  portion  of  the agree- 

ru-nt  which  says:  It  is  the  scn^e  oi  thi-  meilin.;.  that  in  the  event  of 

t' Dealers"  .\s^■  ;iation  (oni[ilying  with  the  re- 

([■ucst  adopted  here  to-day.  the  retail  dealers  will  pledge  themselves, 
Ni  lar  as  possible,  to  buy  only  of  members  in  regular  standing 
"f  the —    Dealer^'  .\--.-oeiation. 

Third.    Fhe  recent  reports  of  the  annual  meetings  of  various 

retail  associations  .show  that  the  ret;iil(rs  are  I  )oking  to  ihc 

~7^  Dealers'  .Association  for  -ujjport  in  all  questions  per- 
taining to  tr.ule  relations.  This  i^,  a  pleasure  to  know,  for  your 
nmimittee  thinks  it  is  proper  that  all  persons  between  the  whole- 
saler-. .Mid   retailers  should  be  referred   to  and  adjusted   by   the 

-  Wholesale  .Association  for  tlu-  wholesalers  and  the  State 
retail  :i>sociations  for  the  rrtailers. 

Fourth.  We  refer  to  section    ^  of  the  second  provision  in  the 

-  agreement,  which  says:  Sales  ami  f|i  otations  by  the  so- 
'  all;  d  retail  dealers  to  consume  s  thnmgh  agents  and  by  methods 
used  by  wholesalers  in  soliciting  trade  from  the  retailers. 

lilth.  The  work  of  this  committee  ha-  entailed  on  the  association 
unu>ual  e.xpen.scs,  and  as  the  work  ])rogresses  these  expense  will 
increase.  The  committee  should  not  be  limited  in  its  future  work 
!)>  lack  of  money.  We  a-^k  your  con>ider.ition  of  this  question,  so 
that  at  the  proper  time  thi-^  necessary  supi)ort  will  b'-  furnished. 

GROIP  6 
F.xnnuT  i 

CtTSTOMIRS    LISTS    OF    Till. 


s  .\ssnri.'.TiC).\ 


The  Government  alleges  that: 
During  the  period  (jf  .-everal  ye.ir>  la-l  |ia-t  the  otTirers  of  said 
"           s  .Association  adopted,  in  further  |)iirsu,in(c  to  the  afcre- 
'  Op.  cit.  U.  S.  V. and  Others     IViition,  pp.  jO-39. 


JO 


o 


I.MHSTKIAI.    (■t)MIiIN"ATl()\S    AND    TrUSTS 


U^C   (It 


said  ("i)ii^piracy  and  CMiiiljinatinii,  a  -clu'inL'  in\(  l\i!i,tj  tlu 

so-calk'(i  "cu^tonuT's  li>ls";  that  is  i<j  >ay,  the  (iLi'i'iuiant, 

,  as  SL'Cri'iary  of  said  la>l-naiiicd  associatinn,  and  with  the 

kiinwk'd^f,  ap|)r(i\al,  and  assistance  of  the  otrui  r-  and  directors 
thereof,  defendants  herein,  secured  from  ti,r  members  of  saifl 
association  the  names  and  addresst>  <if  the  niatiufacturers  and 
wholoaU-  dealers  with  w'loni  the  -aid  'etail  members  carried  on 

tile  bu.siness  of  biiyin;^  a!;d  receiving in  ihe  re.milar  cour-^e  of 

the  interstate  trade  and  commiTce  herelofnre  d'.--cribed.     'I'he-i' 

lists  were  then  rearran^^ed  ijy  >aid so  that  at  all  time-  he  v.;o 

informed  of  the  name^  of  the  retail  cu-tomers  in  his  territory  doing 
business  with  a  i.ir;:e  mimbcr  of  mamifaeturers  and  wholesalers 
located  in  many  State.-.  The  method  of  •'>in,i,'  -aid  li-l>  in  pursuance 
to  said  con-jtiraiN'  and  combination  \\a-  and  i>  a-  toilow-: 

I'pon  learniiiL'  of  a  -hi,imeiU  of  from  a  manufacturer  or 

wholesaler  to  a  loih-unur  as  afore-aid,  said .  acting 

as  sccietar\'  of  ^aid  association,  noiilied  a  numlnr  of  th.e  retail  -  ■ 
customers  of  said  manufacturer  and  wlioiesaler  niakin^  the  so-called 
unethical  shipment,  which  cu-tonier^,  in  acci^rdance  with  a  pre- 
arranged p!.in,  wrote  to  -aid  manufaciunr  and  \vhoL-aler,  prote-t- 
in<^  a<:ain-t    'uh  shipment  and  threat"  iiin^  Ailhdrawal  of  trade  if 

the  s.ime  jjractice  continuetl.     .\t  other  tinies  the  said  — 

,  acting  in  his  capacity  as  secretary  of  .said 's  Asso- 
ciation, wrote  to  such  otTendinj;;  mamifactunr  and  wholesaler  con- 
cerning such  -o-called  iniu'thical  sliipmer.l.  ri  pre-etiting  that  the 
reu'ular  retail  dealers  resi'iitec'  sales  to  con-umer-  by  manufacturi , 
or  whole-alers.  and  >o  usiim  the  power  of  the  united  >tren,gth  •'■. 
su(  h  retailers  to  com|)(l  said  manufacturir  and  whole>a!' r  tu 
cea-e  (haling'  with  such  con>unu'r. 

AneitluT  u-e  to  which  said  "cu-t:'mer'<  li-t-"  were  ]iut  by  -.i;'! 


actini'  as  secretar\    of 


^  „_ -aid    a-s(ieiation    as    alorr- 

said,  in  further  juir-uance  to  said  con.-])irac\'  .ind  ennibinati.in  dur- 
ing many  yiar-  l,i-l  pa-t  ha-  been  to  exchanj;i  -aid  ii-t-  with  olli'i' 

secretaries  of  other  traile  associations  opiratinf,'   in   oilur 

State-  than  those  covered  by  >aid ■ "s  A-sociation  as  afore- 
said, and  when  so  exchanged  the  -ame  method  wi-  pur-ued  by  said 
other  secretaries  in  using  such  exciiaiijred  list-,  that  i-  to  say  the  said 
,>ther  .secretaries  v  uU!  .  rite  letters  of  •  on'.i>laint  or  cau.-e  the  nienv 
bets  of  their  respective  associations  to  write  letters  of  compl.iii  t 
to  the  said  manufacturer  or  wholesaler  on  account  of  such  '"noncth- 
icui "  sales. 


Trust  Methods 


351 


ill  iurtlur  pursuance  to  said  conspiracy  and  combination  said 

as  secretary  of  said ^'s  Association,  and  llic 

.i;.proval  and  cooperation  of  the  oflkers  and  directors  of  said  asso- 
ciation, some  of  whom  are  defendants  herein,  conducted  extensive 
correspondence  with  other  secretaries  of  other trade  associa- 
tions conveying;  inforniatit)n  as  to  the  alieRed  nonethical  dealers  in 

-—  who  had  sold  anrl  shiiiped  to  consumers  in  violation  of 

N,;.l  "cedy  of  ethics."  (JMin;,'  hu.-ines^  as  aforesaid  in  various  States 
.  '  the  I  nited  State.-,  the  purpose  and  effect  of  such  coiresjxjndence 
'■<  iiii;  to  restrict  the  trade  of  the  manufacturer  and  whoiesalec  to 
ilie  regularly  recognized  retail diaier  as  aforesaid. 

I-'.xniiiiT  2 

CIRCVL.\TION    or    IXIORM  \TION  ' 
The  Government  alleges  that: 
In  further  pursuance  to  said  conspiracy  and  combination,  during 

\hv  period  aforesaid,  the  said ■ ,  acting  as  .secretary 

"I  >aid  — '_ '.s  .Association  and  as  a  member  of  said s' 

Bureau  of  Information,  with  the  aid.  assistance,  and  .ooperation  of 

-•lid ;— .  and  with  the  aid  and  assi^tance of  other  meml)t.r<, 

Dlhcers.  and  directors  of  .-aid '.s  Association  an  '  othiT 

ilealers  and  members  of  other  trade  associations  not  nanieu  herein 
a- defendants,  collects!  the  information  of  sales  and  shipments  of 
from  the  m.anufactunTs  and  wholesale  dealers  to  consumers 
hen inbefore  mentioned,  and  with  the  knowledge,  consent,  and 
approval  oi  all  otlur  iiarties  Iur  tobrfore  in  thi-.  paragraiili  men- 
tioned, and  did  thereupon,  about  .March,  ioc(),  furridi  such  infor- 
mation to  the  memliers  of  the  said s"   Bureau,    which 

iMi.irniation,  with  the  names  of  tht  otTending  manufacturers  .md 
uhi^'salers.  was  distributed  to  the  xarious  retail  dealer  members  bv 
thy  .secretaries    *■  the  \arious  tiade  asMiciations  alliliating  with  the 

"'V' ■    l^ui'cau  of  Information;  and  the  said  information, 

with  correspondence  and  records  of  proceedings.  v,a-  ])ublished  in 

the  trade  paper  called  the in  the  year  k^co,  such  jiublication 

l»eing  accomplishetl  by  said and  other  secret.irv  mem- 
bers of  said s'  liureau,  with  the  intent  and  jjurpose  of 

'I'i'riving  the  said  otTending  nianufattm-ers  anci  \\!iol<sale  dealers 

"f  the  trade  of  all  retail members  of  all  the  trade  a.s>ociation.s 

affiliated  with  said s'  Bureau  of  Information  as  alorcjaid. 

'Op.  tit.  I',  a.  V    .    IVtilion,  jip.  51-52. 


:Jr 


352 


IxUfSTKlAl.    ( 'oMIilNAllDNS    ANU    'I'KL'SIS 


'YES 


Exhibit  3 

AND  "no"   lists  of   THi; 

CI  Alio  N  ' 


DEALERS     ASSO- 


,  Xovi-mbcr  iS,  iSgg. 

To  the  members  of  the  associaiiot!: 

Upon  submission  to  the  clussification  committee  of  an  mquiry  as 
to  wh.'ther &  .  New  York  City; Bros., ,  N.  J.; 


& 


'().,  Ho>lon 
-,X.V.;  — 


Mass.; 


&  Co. 


N.J.; 


.Manufai turini;  Co.,  Pnnidence,  R.  1. 
are  legitimate  customersin'  the  wholesale  trade,  under  the  principles 
recognised  by  this  associatit)n,  said  committee  has  earefully  investi- 
gated and  exiiressed  the  opinion  that  the  above  are  within  the  cias- 
of  dealers  whose  requirements  entitle  them  to  buy  of  the  wholesaler. 
Thi^  decision  is  communicated  to  you  by  order  of  the  board  ot 
trustee>. 

Yours,  very  truly, 

Committee  on  Trade  Relations. 
,  Secretary 

YES. 

,  August  I.  igoo. 

To  the  members  of  the  assoelalion: 

Upon  submissi'"  of  the  ([ue-tion  to  our  classitication  committees 
as  to  whether  th.  .artie-  named  herewith  should  be  considered 
legilimate  customer's  of  the  wholesale  trade,  under  the  principles 
recognized  bv  this  association,  -aid  committees  have  carefully 
investigated  and  expressed  the  opinion  that  they  are  not  within  the 
class  whose  reiiuirements  necessitate  their  buying  of  the  wholesaler, 
this  decision  is  cummunicat(  d  to  you  by  order  of  the  board  o! 
trustees. 

Yours,  verv  truly, 

Commit rr-.E  on  Tkai'i:  Delations. 
,  Secretary. 

NO. 

(Here  follows  a  list  of  7S  names  of  individuals  and  firms,  manu- 
facturing concerns,  etc.  in  the  States  of  New  ^■crk,  New  Jersey, 
VennsvK-ania,  and  Connecticut. —F  ;.l 


'  Op.  cit.  i  ■  S.  V.  

hibits  O  and  1',  pp.  y^^J 


Dcokn'  Aiiociatiun.    retiuoti,  Ex- 


CIRCULAR  ISSUED  BY 


Trust  Methods 

Exhibit  4 
dealers' 


353 


ASSOCIATION  TO  THE 
TRADE  1 

The  following  ha\e  been  reported  by  the  various  eastern  associa- 
tion-^ as  jobbing  or  selling  directly  or  indirectly  to  consumers.    The 

nu  iiihers  of  the Dealers'  Association  are  requested 

t(j  couijerate  Mith  the  eastern  associations  by  refusing  to  sell  them 

(Here  follow  the  names  of  more  than  fifty  individuals,  partner- 
ships, aud  corporations  engaged  in  the trade.— Ed.) 


Exhibit 


OKITCIAL  REPORT  OF  THE 
TION,  — 


DEALERS    A3S0CIA- 


,  NEW  YORK,  N.  Y.^ 

Statement  to  members,  April  igng.— You  are  reminded  that  it  is 
bcLause  you  are  memi,vr.  of  our  association  and  have  an  interest  in 
rommon  with  your  fellow  members  in  the  information  contained 
in  this  statement,  that  they  communicate  it  to  you,  and  that  they 
'  ommunicaie  it  to  you  in  strictest  confidence  and  with  the  under- 
standing that  you  are  to  receive  it  and  treat  it  in  the  same  way. 

Ihe  following  are  reported  as  having  solicited,  quoted,  or  as  bav- 
in;.^ sold  direct  to  the  consumers: 

(Here  follow  the  nanus  of  more  than  fifty  individuals,  partner- 
ship>  and  corporations  engaged  in  the trade.— Ed.) 

REMOVED   SINCE    LAST   REPORT. 

(Here  follow  the  names  of  fifteen  individuals,  partnerships,  and 
torporatioiis  engaged  in  the trade.— Ed.) 

Members  upon  learning  of  any  in;tance  of  persons  soliciting, 
qunUiifr,  or  selliuo  direct  to  consumers  should  at  once  report  same, 
and  in  so  doim:  should,  if  possible,  supply  the  Jo'hnving  information 
'Ihe  number  and  initials  of  car,  the  name  of  consumer  to  whom  car 
iV  consigned,  the  initials  or  name  of  shipper,  the  date  of  arrival  of 
car.  the  place  of  ddivery,  the  point  of  orii^iii.^ 

'Op   lit.  r.  .S".  V. Dealers'  A':socialion,  Petition,  Ex- 

nihit  1.  pp.  q7-Q8. 

Op.  (it.  U.  S.  V.  ■ Dtaiers'  Association.     Petition,  V.x- 

nibit  l,p,\  98-ICX3. 

'  Ilalit.,  iiri.'  the  editor's. 


IT 

:,4 

Mi 

354 


IxnrsTRiAi.  ("oMBiNArioNS  AM)  '1"klsi>. 


As  \vc  art'  a^-oriatrd  for  n^.utual  protection,  \vc  should  not  go  into 

territory  where  our  a^-oeiates  have  and  sell  or  otter  to  sell 

at  a  price  lower  than  we  sell  it  in  our  home  territory. 


Exhibit  6 


ASSCVIATION  * 


The  Government  alleges  that: 
First.  During  the  period  aloresaid  defendants  aave  conspired 

and confederalecl together  to  prevent  manul'acturers  of -supplies 

located  throughout  tlie  United  States  from  selling  and  shipping  — 
supi)lies  to  anv  perxms,  tirms.  (ir  corporations  located  in  the  States 
of  California,  '\Va^hington,  and  Oregon  who  have  iml  belonged  to 

{j^^, AsM)ciation  and  whose  names  have  not 

been  listed  in  a  book  callerl  the  '•  Blue  l^ook,"  to  be  hereinafter  (k- 

scribed.  ...     In  order  t  .  forte  the  nianv.t".icti:rer-  of -supplie? 

"to  refuse  to  sell  and  ship  to  persoi^s  (Uher  than  the  defendant?, 
defendants  by  agreement  with  I'ach  other  have  continuously  durin;,' 
said  period  r'el"u>ed  to  .mler  or  buy suppiie-  from  such  manu- 
facturers of supplies  a>  have  sold  and  shii)i)ed  said  supplies 

to  perM)ns  in  the  States  of  California,  Washington,  aiul  Oregon  wh  > 

are  not  members  of  the A>sociation  and  are  not 

listed  in  the  Hlue  Hook. 

.\cting  under  agreinient  with  I'ach  other,  detendants  havi' 
withdrawn  their  bu>ine-s  fnMii  m;MUifacturer-  who  have  sold  an.] 
shipped  to  i)ersons  who  have  refu.-ed  to  join  said 
.\ssociation,  or  to  persons  whom  defendant.-  have  not  recog- 
nized as  legitimate  jobbers,  and  ha\e  not  admitted  to  membership 
therein,  and  det'eiulants  have  boycotted  such  manufacturers  until 
they  com'-ielled  them  to  confine  their  sales  to  defendants. 

Second!    The  defendant '^f  the  —  — -  Associations 

acting  in  agreement  with  the  other  detVndani-.  ha-  Mnce  January  i. 
iqo7,  jirinted  from  time  to  lime  and  issued  a  liM  of  jobbers  ot  — — 
sui)plies  in  the  United  State-,  commonly  called  in  the  trade  the 
"Blue  Book,"  and  has  di>tributed  slid  li>t  to  manulaeturers  eii- 

ga"ed  in  the  manufacture  and  >ale  of -ui)plies,  and  to  the 

jobbers  named  in  the  Blue  Book.     In  the  Blue  i5ook  are  i^rinto! 

arbitrary  detinitinns  of  a  manufacturer  and  jobber  o!  -uiiphi^. 

These  det-nitions  express  the  opinion  of  the  defendants  as  to  the 

'  r„!lcJ  Slates  of  Amrrir.,  v. —  Jl^.nnnfh,:.     Petition  b 

Equity,  In  the  —  Court  of  ihe  Cmlcd  St.itcs  mr  l\v: Dir^inet  of 

pp,  12-14- 


Trust  Mi.thods 


.v-i^ 


ions  necessary  in  nnliT  to  entitle  one  to  he  called  a  ni; 

(1  to  lie  treated  a^  ^ia  h.     Ii  i^  the  inteiiti'^ 

iiid  of  tlie  defendant^  thai  the  iJhic  Book  >-hal 


nu- 

■!  of 

I  he 
all 


f|ua'ifirat 

facliircr  or 

the  _ 

considered  hy  the  iiianulacturiTs  a^  containinp;  the  nanus  ,..  ,  ,. 

[urson.s,  t'lrnis,  and  coqwralions  in  the  L'niled  States  who  are  leiriti- 

niate  j()i)ber.s  of  supplies.      All  the  defendant  corporations 

and  ])artiier>hiiis  (e.xeept  the  —  of  the Associa- 

ti;)ns  are  listed  in  the  iJkie  Hook;  furthermore,  these  defendants  are 
the  only  persons,  firm-,  or  corporations  located  and  doiiiK  a  — — 
i)U>iness  in  the  States  of  California,  \\'a>hin,u'ton,  and  Oregon 
who  are  named  in  tlu'  lihie  Hook. 

Iiurin;,'  r-aid  ])eriod  no  ]irr~on,  lirni.  or  corporation  desiring  to 
engage  in  l)U>iiie.->  as  a  johher  of >ui)plies  in  the  States  of  Cali- 
fornia, Washington,  or  Oregon  could  be  listed  as  a  jobber  in  the  Blue 
IJook  except  a!  the  arbitrary  discretion  of  a  majority  of  the  jobbers 
belonging  to  tk-e .\ssociation,  and  doing  busi- 
ness in  the  locality  where  said  i)er>on,  lirm,  or  corporation  desired 
to  do  business  as  a  jobber,  and  no  person  can  now  be  so  listed 
excep.t  by  tiie  consent  of  such  jt)bbers.     In  order  to  prevent  an 

increase  in  the  iramber  (.1  jobbers  of su[)plies  in  said  three 

States,  defendants,  agreeing  together,  have  re|)eatedly  and  arl)i- 
trarily  refu-^ed  to  give  their  cuisent  to  the  listing  in  the  Blue  Hook 
"f  persons,  lirnis,  and  corporation-  desirous  of  engaging  in  business 
a-  jobiKTs  in  said  States. 

GROUP  7 

HxitlBIT    I 

TR.\ni-:  ' 

The  Government  alleges  that: 

I- mm  about  the  year  1004  to  the  present  time .  de- 
fendant herein,  has  conducted  a  detective  agency  under  the  name 

and  style  of  the Information   liuri'au.     The  said  — —  is  a 

regularly  paid  (  niployee  of  the  voluntary  association   heretof(,re 

ile^cribed  as  the s  .Association.     During  the  several  vears 

last  past,  and  until  the  pres'-nt  time,  said ,  with  the  assistance 

')f  a  coqis  of  detectives,  and  in  the  performance  of  work  done  in 
pursuance  to  and  in  assistance  of  said  coi.spiracy  and  coml)ination, 

has  collected  information  respecting  sales  and  shipments  of  

irons  manufacturers  and  wliolesalers  to  consumers,  and  has  fur- 
'  0[).  cii.  L'niUd  Stall's  v.  .     I'riiiion.  pp.  54-55. 


MICROCOPY    RESOLUTION    TEST    CHART 

-NSI  ond  ISO  TEST  CHART  No    7< 


1.0 


I.I 


1.25 


!28 


1 2.5 

12.2 

2.0 


1.6 


^      APPLIED  irvHDE     lr,c 


<,    i   ,^»     M' 


JO 


^0 


Inuistkiai.  ('(imhinauo.ns  AM)  Trusts 


nished  said  informalior  to  suid 
nicni])ers  of  the  said      —  


aiul  olhcr  secrctar) 

Bureau  of  Information  for  the 

use?  and  purposes  hereinbefore  descriljed,  and  to  tlie  >ai(l 

for  the  purpose  of  having  the  same  published  in  the  said 

.  and  so  distributed  throughout  the trade  in  \arioui 

states  reached  by  said  publication,  all  with  the  in'ent  and  p'lrpurf 

on  the  part  of  said  ,  ,  and  of  preventing  sales  and 

shipment^  of in  the  trade  aforesaid  between  the  manufacturer 

and  whole-alcr  on  one  hand  and  the  aforesaid  consumer  on  the 

<ither.    Said al>o  conducted  investigations  and  made  reports 

to  the  ofTicers  and  members  of  said 's  Association  of  the 

character  of  the  business  done  by  various  retail dealers  in 

various  States,  which  flealrrs  had  not  complied  with  the  aforesaia 
rules  and  regulation  entitling  them  to  membership  in  said  la.-t- 
named  association,  and  in  i)ursuance  to  said  general  consi)iracy  and 

combination  said ,  with  knowledge,  approval,  and  assistance 

of  the  officers  and  member>  -if  said 's  Association,  adopted 

and  carried  out  various  schemes  and  devices  for  the  injury  ami 

destruction  of  the  business  of  said  retail  dealers  who  desired 

to  do  business  in  a  manner  different  from  the  code  of  ethics  ami 
rules  adopted  by  said  association.    'I"he  money  used  in  promoting 

the  work  of  said  and  the  said Information  Bureau  wa.-< 

raised  by  subscriptions  paid  by  members  of  said  — 's  Asso- 
ciation and  others,  and  .solicited  bv  said  and — - 


-s'  Bureau  of  In- 


and  other  secretary  members  of  said  

formation. 

I'AilllUl     J 

ixi'i.osivi  s   iKAni:  ' 

.•\.  1  eiideaviTfil  tn  loeatf  the  tradr  ili.ii  the  Chattanooga 
Powder  Co.  wa>  supplying  and  thin  t.ikr  li  ,iu,i\-  from  them  hv 
naming  lower  prices. 

(^.   Did  you  locate  the  trade? 

.•\.  I  was  advi  I'd  l)y  the  railroad  agent  at  Ooltewah.  Tenn..  who 
was  in  the  emjiioy  for  the  purpose  of  furni-hing  us  with  the  infor- 
mation regarding  all  >>\  the  -liii)nients  of  the  Chattanooga  Powdfr 
Co. 

Q.  Who  employed  him? 

V   T  did,  sir. 

'  Ii'^timony  of  I'.  J.  W.uldili,  op.  tit.  I'.  S.  v.  /;.  I.Jh  Pont  de  Nemuun  aiid 
(rmtuii^.    I'ct.  Ret.  I'tstiinony,  \i>l.  I,  pp.  i^^-ib^. 


Trust  Methods 


)57 


liu 


O.  When? 

A.  I  think  it  was  in  the  year  1S03. 


().  What  did  yi)u  pay  him? 

\,  I  lirst  paid  him  Si 5  a  month. 


an< 


i  later  SiS. 


(^1.  What  was  he  to  do  for  that? 

\.  111.'  wa>  to  furnish  a  weekly  statement  >howin,t;  all  shipments 
1)1  pi)\V(kT  made  from  Oohewah,  Tenn..  i)y  llie  Chatlanoo;,'a  I'owdcr 
Co..  giving  name  of  consignee,  the  number  of  kegs,  and  the  des- 
tination. 

().  What  did  you  do  with  the  reports  that  were  made  to  you? 

A.  1  mailed  a  copy  of  it  to  Wihnington,  Del.  every  week. 


ExniiaT 


1 


COMI'ANV 

RtPORTS    OF    COMI'I  TiriVl.    SHIPMKNTS    OBTAIM-U    FROM    RAILROAD 
F.MPLi'VllS    IN    (iTHl.K    I'AKrS    Ol'     llli;    (OrMRV. 

lilKMlNClIWi.     \l.\. 

The  Government  alleges  that: 
v.ho  was  assistant  In  tiie  manager  in  the  olhee  of 
Company  at  Hirn-.ingham  up  to  some  time  in  1002, 

had  a  >\stini  of  villaining 


r.  X- 


G. 

theT 

testitied  that  at  tliat  time  the  T 

from  railroad  ch'rks,  information  ((uuirning  shipments  of in 

that  t(rritorv  by  iml. pendent  ''oiu'erns,  including  both  shipments 

into  birmingham  and  s!iij)mi'nts  from  birniinj/liam  to  all  points. 

';;s  information  was  sent  by  thr  railroad  cUrks  to  a  post-office 

:"i\,  without  any  name,  this  box  Ixing  rented  by  the  T 

Company  for  that  purjiose  alone.     The  information  so  ol    aiiieil 
was  furnished  to  tra\eling  salesmen  antl  other  agent>  of  the  T 
with  instructions  Ut  get  the  business  in  any  way  they  could;  the 

T was  usually  able  to  get  its  representative  to  the  customer 

before  the  -liipment  g^t  there.     i\'nl.  — .  p]).  J 15 2-5.) 


TF.RRITORY   OF COMPANY   OI     . 

1).  J.  D was  employed  by  the  T from  about  1S85  to 

iilttiut   iQoo  as  special  man  in  the  sales  de])artmcnt  with  head- 

M'.Mrters  at  .     The  territory  of  the  T Company  of 

with    whi(  h    he    \va>   then   connected,   originally    included 

'ii'.  lil. Company  v.  Ihr  I'nitid  Slates.    for  United  States, 

\   1     -.  pp.  S97-<JOi,  6o7-(>og,  015-618,  Ojo-Oii. 


m\ 


m 


m 


Hv^:  :il2i»' 


3  5'^ 


iNursiKiAL  ('().umNAiiw.\>    \\u  Tklsts 


Mirhigan,  part  of  Indiana,  and  nearly  all  of  Ohio.    I) tcsthled 

that  durini^  all  that  time  the  T Company  received  re- 
ports of  competiti\e  shipments  througliout  il>  territory,  which  were 
generally  understood  in  the  office  to  come  from  railroad  employees. 
(\'ol.  —,  pp.  3030-32.) 


D also  testified  to  inc'ividuai  cases  in  which  he  knew  of 

aj^^ents  of  railroads  furni>hin<i  information  rr^'anlin;;  competiti\e 
shi[)ment^,     lie  staled  1  vol. —,  pp.  3032-33)  that  at  Alliance,  Ohio, 

the  a;j;ent  of  the Railroad  furnished  such  rejKirts  and  recei\ed 

free  as  compensation,  and  th.at  at  .Massillon.  Ohio,  the  aijent 

of  the & did  the  same,  and  al-o  reieixed  as 

compensation.    The  defendants  called  the  ajjeiil  of  the Rail- 
road at  .\l   ance  and  the  afjent  of  the  — —  & at  Massilloii, 

who  deniec'  that  tin  y  had  furnished  sucJi  information  or  received 

therefor;  hut  on  cross-examination  it  appearul.  that  there 

were  numerous  emi)loyces  of  the Railroad  at  .\lliancc  and 

several  emi)loyees  of  the  & ut  Massillon.     ( , 

vol.  — ,  p.  147S; ,  vol.  — ,  f).  14S0.)     It  is  quite  evident  that 

D used  the  term  '  aeents"  in  a  .^meral  way,  referrin,;,'  to  some 

person  coniucied  with  the  railroad  otlice.  and  that  the  mere  state- 
ment of  these  two  head  agents  is  no  conlr.ulictii)n  of  his  testimony. 

In  this  connection  it   iiiay  hi'  noted  that  C was  the  T -'s 

a.u'ent  at  .Ma'--ill<in  ;:t  llie  time  te^tilie<l  to  by  D .  ar.d  that  on 

Juni-   II.   i(;co.  K.  \\  .   I ,  who  was  manager  of  tin-  Ciexciaiul 

station  for  the  T ,  wrote  the  letter  ( I'etitioner's  I'lxhihit  .SjSi 

to  C at  Massillon,  askin^j;  him  about  certain  shipments  of  the 

H Company,  and  saying: 

It  seems  to  me  that  you  could  Icirii  this  of  local  frei^dit  amnt. 
If  you  can.  let  Us  know. 

D also  te<tit"ied  (vol.     -.  pp.  3032-3)  that  he  knew  about  ,ui 

arrangement  at  Lansinj;,  .Mich.,  where  tlie  clerk  at  the • 

depot  was  furnishing;  information  regarding  competitive  shipments, 

and  wa-  furni-lud  blanks  by  the  T 

to  report. 


Coi.ip.iiu-  ujion  which 


(i    I.    K 


POINTS  IN   ILLINOIS. 

who  had  been  a  salesman  for  the  T- 


in 


I'eori.t  (111.)  (erritury,  teslilied  that  he  was  instructed  by  M- 


Trl^jI   Mkthous 


J59 


s[)cci;il  a;,'t'nl  of  tht-  T al   I'eoria,  to  go  to  M(Mimouth,  111. 

where  an  inilfiiciKJcnt  concern,  the  X Companv.  was  doing 

business,  and  make  arrangements  with  enifiloyei-  of  th.e  railroads 
to  furnir-h  rejmrt.s  of  that  companys  shipments;  that  he  employed 

a  freight  handler  in  the  <iriice  of  the Railroad  for  S2  a 

month,  wht)  furni--hed  tliN  iiiforniation,  a;id  that  .M p/aid  him 

the  iimount  by  ca>h  or  clu  ;k.     (\'o\.  — ,  pp.  i,i,v''>  7-' 

M ,  testifying  for  the  defendants,  admitted  (vol.  — .  u.  1017) 

that  K. got  this  information,  and  that  he  (lid  not  know  but  that 

he  got  it  from  railroads,  but  asserted  th.at  he  did  not  pay  him  the  S2 
a  month.    It  may  readily  be,  howe\er,  that  the  item  was  included 

in  K 's  expense  accounts  and  paid  in  a  gaieral  total,  and  not 

by  way  of  sei)arate,  specific  i)ayment. 


.\- 


corNcii.  m.rris,  imw  \,  and  mn'oi.n,  nkbr. 


who  at    till'  time   r(  ferred   to  in   his  testimony, 

r^ij:;  and  iSqO,  was  employed  li\-  iheT at  Council  BluiTs,  Iowa, 

tc-~tilied  that  he  obtained  ri[)ori->  of  competitive  >hipment>  from 

cover- 


employee--  of  the  — 
in-:  all  indejjendent 


-.  and  railroads 


parsing  throu::h  Council  iiIulT.->;  that  these 
•■eixirts  showed  the  name  of  the  consignor,  the  name  and  address 
<if  the  consignee,  ar.d  the  number  of  barrels  in  the  shipment:  and 

that  under  the  instructions  of  tlie  T "s  agent  at  Council  HlutTs, 

K.    —  VV.  T ,  he  ga\e  these  employees  for  such  ser\ice 

iVol.—,  pp.  3142-3.) 

Healsostated  (p.  3140  th.it  he  tried  to  make  arrangement>  with 
niilroad  tagger- and  nun  v,lio-e  Ini-ine--.  it  \\,i->  to  get  car  numbers, 
etc.,  to  make  reiiort>  of  tiie  shipnunl-  from  Lincoln,  .Nebr..  of  the 

N' Company,  an  indepen<ient  concern,  and  did  not  suc- 

"1.1.  hui  that  tile  T 's  own  employees  obtained  the  informa- 

•'in  by  watching  the  goods  at  the  depots.    Later,  wiuii  Mr.  B 

,1-  a  traveling  ^ale^man  for  the .  he  received  from  the  T 's 

office  lists  of  ( ompetilive  -hi|)ments  into  hi-  territory. 


TKRR.TORY. 


J-  J-  D ,  who  was  a  salesman  and  division  auditor  for  the 

7"      Company  from  iqoo  to  IJ03,  testitied  tliat  during  this 

time  there  was  a  system  in  vogue  by  which  the furnished 


3<5o 


Inuustkiai,  C  u.mbixatk)Ns  and   Tri  sts 


reports  to  its  salcsnuTi  sho\vin<r  the  cum[)etilivL' shipped  into 

their  respective  territories;  tliat  frequently,  on  the  basis  ui  these 

reports,  such  salesmen  would  tell  customers  of  independent 

companies  about  shipment-  of bef(jre  the  goods  arrived;  that 

the  salesmen  were  instructed  U)  tind  out  the  circumstances,  the 

prices,  and  why  the could  not  sell  the  customers.    D 

also  testified  that  he  was  instructed  by  V ,  the  general  manager 

of  the ,  to  falsely  tell  such  customers  that  the they 

had  Ixiught  had  been  originally  purcha-ed  from  the 

Company  and  that  the could  su[)ply  the  same di- 
rectly at  a  lower  price.     (Vol.  — .  pp.  ooO-  13.) 

^' was  called  as  a  witness  for  the  defendants  in  the  Missouri 

case  in  ic;o(),  and  on  cross-examination  was  comiJilled  substantialh 

Id  admit  that  the —  C\)mpany  regularly  got  rej)orts 

from    railroad   employees   regarding  competitiM'    '-hipnients,    and 
that  these  reports  were  paid  for;  and  that  tin    information  thus 

olitained  was  -mt  to  the agents,  with  in>truction  to  cut 

prices  if  necessary  to  get  the  business.    (Vol.  — ,  pp.  iiic-12.) 

OTHKR  r\F AIR  MF.THODS  OF  ORTAININT,  IXFORMATION 
RKGAKIMNC.  CONI'ETITURS"   lilSINESS. 


AIIVWV,    M  W     M)RK. 

.•\s  already  stated,  CI Brothers  have  for  some  year?  been 

actively  compel imr  u  ith  the  T Company  in  the  sale  of  the 

at  .\lban_\ .     It  ap|ie.ir>  tluil  in  the  '•jjringof  1004.  Mr.  \V 

E ,  the  T— — s  manager  at  .\lbany,  ein])loyed  the  F De- 
tective .Agency  to  secure  information   regarding   the  business  of 

G s.      The  transaction  is  described   in  tlir  le-timonv  of  I    J. 

D ,  who  was  a  part  owner  of  the  V l)ileiti\e  .\genc> 

(vol.  — ,  pp.  i()5:  6;).  and  also  in  the  testimony  of  .M.  K.  O ,  a 

driver  of  the  G- s,  to  whom  a  bribe  was  offered  to  furnish  infor- 
mation (vol.  — ,  pp.  102;?  :>)  There  is  no  contradiction  of  thi~ 
testimony  by  the  defendant-. 

It  apiK'ars  that  \V K -asked  the  managers  of  the  detective 

agency  to  have  someone  bribe  a  driver  in  the  employ  of  the  Ci 

Brothers  t(,  furnish  reports  of  their  business.    The  detective  agency 

engaged  a  man  for  this  purpose,  who  met  O and  represented 

himx'lf  as  in  the  insurance  business.     Later  he  met  O again 

and  told  him  v. hat  liis  real  business  was.  and  eiitereil  into  an  ar- 


Trust  Meiiiods 


361 


was  to  furnish  at  stated  periods  report; 
Brothers.    He  agreed  to  pay  O- 


rangement  by  which  O— 

showing  the  business  of 

$5  for  each  report,  and  actually  gave  him  S5  in  advance.'  O — 

immediately  informed  (i Brothers  of  what  had  taken  place, 

turned  over  the  identical  S5  to  them,  which  was  marked  for  identi- 
fication and  produced  at  the  time  of  taking  the  testimony  in  this 
case.  He  was  instructed  by  his  em])loyer.->  to  [proceed  to  carry  out 
the  arrangement. 

The  man  who  had  interviewed  O told  him  that  he  would 

receive  a  letter  of  instructions  from  Xew  York.     He  did  receive 

?uch  a  letter  ( Telitioner's  Kxhibit  045 1  -igned  "G X ," 

instructing  him  to  send  a  report  on  the  loth  of  each  month  to 

("' X ,  i5()  West  io5tli  street,  Xew  York  City,  and  to  sign 

■ith  an  "X".     Petitioner's  E.xhiliit  O47  is  a  letter'subse(]uently 

nteived  by  O from  G .\ ,  dated  May  is,  1004,  which 

>ays  in  part: 

Report  received  and  is  satisfactory  for  a  beginner. 
Try  to  be  more  accurate  in  tlie  int'ormation  in  future, 
and  have  report  include  in  full — 

(i)  Dates   when   cars   arrive. 

(2)  Whether  box  or  tank  cars. 

(3)  All   letters  and  numbers  on  cars. 

(4)  Contents  of  cars. 


was  really 
-  to 


The  man  who  went  um'er  the  name  of  G — —  X— 

named  V .     He  foruarded  the  report-  >ent  him  bv  O 

the  F Detective  .Agency  at  .Mbany,  and  they  in  turn  delivered 

them  t.>  the  'I"-—    .     \\' E lurni-hcd  the  1-' Delectivt 

.\gency  the  money  which  was  paid  to  O . 

D also  testilied   that   W K employed   the   F 

Detective  .Vgency  to  furnish  men  to  follow  up  and  watch  the  wagon- 

of  the  Cj s  in  .Vlbany  and  also  the  wagons  of  the  independent 

I Company  at  Troy;  that  sometinu-  they  would  havi 

one  man  ftdlowing  the  wagons  and  -omctimes  as  many  as  three;  that 
these  men  kept  a  record  of  the  place>  where  the  wagons  made  stops; 
that  each  of  them  was  paid  S4  a  day  by  the  detective  agency,  and 

that  the  T paid  the  detective  agency  for  the  services  thus 

rendered. 

Q ,  one  of  the   men   who  was  employed   by  the  detective 

acency  to  follow  G Hrothers'  wagons,  confirms  this  testimonv. 

iVdl.  — ,  pp.  1929-31.) 


I 


R 


362 


IXDI'STKIAL    ('n\i;;l\.'viI(JNS    ANO     TKLblb 


BIRMINCiHAM,    ALA. 


G.  T.  X- 


testilied  thai  when  the  G.  T.  X- 


Company 
Kid  a  man 


started  in  Iju^inc^s  in  Birmingham,  in  1905,  the  T — 

follow  their  wagons  on  a   bicycle  constantly  to  count   the 

number  of  buckets  delivered  at  each  store.    Later  the  T     —  tried 

to  get  reports  from  the  drivers  of  the  X Company's  wagon.^. 

X instructed  one  of  his  new  drivers  that  the  T Com- 
pany would  probably  ajipn-ach  h;irn  in  a  day  or  two  w  ith  a  ])rop().-i- 
tion"  to  pay  him  for  information,  and  that  he  should  accept,  and 
instructed  him  to  :.gree  to  give  a  coi)y  of  the  bills  each  night  tor 

!;o  cents  a  da  v.    Soon  a  representative  of  the  T Comi)any 

actually  did  make  thi^  ])ro})o.--iti(jn.  and  the  driver  furnished  him 
misleading  rei)orts,  which  were  made  out  by  the  manager  of  the 


X- 


Company.     i\'ol.  — .  pp.  2157-S.) 


at   Hirmingham  during; 

lori/ed  an  em[>loyee  of  the 

Coni- 


S .  the  .special  agent  of  the  T 

this  time,  testiiied  that  he  r.evt-r  aul 

T to  j)rocure  information  from  adri\-erof  the  X 

panv.  and  that  it  was  never  done  with  his  knowledge  or  by  his 
a|)]iroval,  and  he  does  not  think  it  was  done  at  all.     (\  ol.  — ,  p. 

840-)  .       ,        .         . 

X "s   specific   statement    remains    uncontradicted.      S— < 

subordinates  might  have  done  things  of  which  he  did  not  kn(Av. 
His  duties  overed  the  entire  Birmingham  divi-ion,  including  all  or 
nearly  all  of  Alabama. 


I'IdKIA.    ILL. 


U.  S.  r testiiied  that  G C .  assistant  manager  of 

the  T at  I'eoria,  otTered  him  S20  a  month  if  he  would  get  in- 
formation regarding  the  shiiMiients  of  the  S Company 

from  Peoria;  and  that  he  got  the  information  by  bribing  N .  a 


and 
teamster  of  the  S 


Company,  for  S2.50  a  week  to  furnish  a 
—  in  turn  giving  these  reports  to  C • 


report  of  all  shipments,  I' 

This  arrangement  continuid  for  about  six  week.s  when  it  was  di.^- 
covered  anil  thi' i-mployee  discharged.  (\'ol.  — ,  liji.  1347-S.)  This 
statement  is  corroborated  in  every  respect  by  the  testimony  ot 

Mr.  Y.  1).  F ,  manager  of  the  S Company  at  Peoria. 

who  discovered  the  briber)-  of  his  employee  by  Merritt.     (Vol.  ~. 

PP-  1374-5-) 


Trust  Methods 


3(^3 


IMuRiLVXIOX    OCTAINKD    BV    TIIj;    T- 


rKf).\! 


INSPECTORS 


OFFICE  REGARDING  COMI'EITUVE  ISLSINESS. 


D.  J.  D- 


tfstilkd,  that,  wliik-  he  was  in  the  employ  of  the 
T from  uSS(j  to  1900  in  the  territory  of  the  T Com- 
pany of ,  the  state in^pcctor.->  furni.-lu'd  the  T monthly 


-,  and  that  he  frequently  saw  the 
Office  of  the  'I' .     (Vol.  — ,  p. 


rejtorts  of  their  inspections  of 

deputy  inspectors  at  the  

3034.)     Petitioner's  Kxhihit  S27  is  a  letter  written  by  D.  J.  S- 

inana^'er  of  the and sales  dei)artment  at   CleNe- 

land,  to  J.  W.  K ,  dated  June  15,  1900.    It  slates: 

It  i~  important  that  as  far  as  jiossihle  we  secure  the  monthly 
conipetili\e  inspection  through  Mur  Icical  am'iUs.  There  is  no 
reason  why  our  agents  should  n<it  he  ahle  to  secure  this  in- 
formation promptly  at  points  where  deputy  inspectors  are 
luialed.  Of  course  it  is  an  "oijen  hook,"  ami  their  excuse  for 
asking  for  the  Iigures  is  simply  in  order  that  they  may  have  th_' 
information  a  little  earlier  than  if  obliged  to  get  it  through  the 
regular  channel.  I  a^-sume  that  mcjst  of  our  local  people  are 
in  close  enough  t<ai(h  with  the  deputies  to  secure  the  desired 
information.  Kindly  impress  ujion  thtm  the  importance  of 
securing  same  prompll}-  on  the  lirst  of  each  month,  forwarding 
to  you.  and  you  in  turn  to  me,  so  that  I  will  get  the  information 
not  later  than  the  5th  o''  the  month. 

G.  B.  ,  vice-president  of  the  T Company  of  . 

called  by  the  det'endants.  stated  (vol.  — ,  ji.  151(1   i' 


that  the 

inspectors  maintained  p;u)lic  records  that   were  open  to  anyone, 

and  that  the  T had  a  right  to  exanune  these  records  for  the 

purpose  of  ascertaining  shipments  or  sales  of  competitors,  and  com- 
petitors could  do  the  same.     These  records  are  public  record^  for 

one  purpose  only,  which  is  to  show  whether  the bears  the  jjroper 

test.     Moreover,  the  information  which  the  T received  was 

ad'ance  information,  the  above  letter  showing  ])lainly  that  it  was 
secured  before  the  results  of  the  inspections  became  a  public  record; 
andthe  T could  have  no  legitimate  need  for  advance  infor- 
mation or  for  any  information  whatever  except  for  the  purpose  of 
endeavoring  to  take  trade  away  from  the  in.depenrlents. 

K.  W.  G ,  who  was  manager     •'  the  T 's  Indianapolis 

territory  for  some  time,  testilk'd  that  refx-rts  came  to  him  mvste- 
riously  every  day,  delivered  by  a  boy  and  written  on  plain  paper  in 


0^4 


Tnikstriai.  ("ombinations  a.nu  Trusts 


Kad  piiii  il,  ^howiim  thu  >hii)mfnts  of  independent  concerns,  that 

lie  Ijelieved  tlu-e  came  from  tlie  office  of  the  slate inspector, 

and  that  the  practice  continued  until  it  was  exposed  by  indepen- 
dent   conipanie: .     (Vol.  .:;,  pp.  i3.;5-6.)_ 

S.  T.  U ,  who  aljout  Kjoo  became  assistant  to  Ii ,_the 

latter  having  succeeded  G as  manager  at  Indianapolis,  testilkd 

(^yl_  _^  p.  .-07)  that  for  about  a  year  information  of  comi)etitive 
shipments  came  to  the  office  from  a  source  which  was  rather  ;i 

mystery  to  him  at  the  time,  but  he  afterwards  learned  from  H 

that  it 'was  delivered  by  a  youn<,'  man  who  was  in  st^me  way  con- 
nected with  the inspector's  office  at  ;  that  this  young  man 

went  around  examining  barrels  in  the  freight  depots  under  ihc 
pretence  of  ascertaining  whether  or  not  they  were  correctly  brandtd 
by  the  inspector's  office;  that  he  usually  came  every  day  with  the-c 
reports  and  was  verv  quiet  about  it;  and  that  these  reports  showed 
the   shipments  of  all   companies  doing  business   in    Indianapolis 

except  the  T ,  giving  the  names  of  the  consignor  and  consignee, 

the  (luantitv  and  kind  of . 

B ,  testifying  for  the  defendants,  said  (vol.  — .  pp.  802-0,^' 

that  he  had  never  heard  of  such  a  thing  and  did  not  believe  there 

was  a  word  of  truth  in  it,  but  thi-  is  no  contradiction  of  1) > 

specific  ter-.timoiiy.      15 was  at   Cincinnati  and  could  not   be 

expected  to  know  all  the  details  of  the  conduct  of  the  businc.-s 
throughout  the  great  territory  of  the  T Comj)any  of         . 

Petitioner's  Kxhibit  .S40  is  a  circular  letter  addressed  to  sales- 
men, .signed  by  L B.  S ,  manager,  on  the  letter  head  of  the 

T — ^ Comiianv.  dated  September  16,  1004.     It  was  received 


by 
T- 


i: 


I) (\-,,'l.  — ,  p.  ^5144),  while  he  was  a  salesman  of  the 

in  Nebraska.    The  letter  is  as  follows: 


■S'ou  understand  we  get  a  report  I'rom  the  state inspector 

every  month,  showing  the  number  of  barrels  our  compel iturs 

receive  each  of  and ,  and  from  this  report  I  inui 

that  the  Oil  Company  is  shipi)ing  out  from  40  to  50 

barrels  a  day;  and  yet  the 'reports  of  competitive  shipments 
sent  in  by  our  salesmen  on  Form  114  do  not  show  anything 
like  this  amount;  and  our  home  otTice  can  not  understaiid  why 
there  should  be  such  a  di>crcpancy.  If  you  will  give  this  mat- 
ter your  strict  personal  attention,  it  does  appear  to  me  that 

you  ought  to  be  able  to  find  out  how  much  of  this  and 

goes  into   your   territory.      I   feel    that   salesmen   with 


Trust  Methods 


36s 


■I  in 


ordin.ny  Jiulgmenl  can  g^t  this  information  without  making 
tho  merchant  foel  that  they  arc  too  in(iui>itive,  or  that  they 
are  tryin.L,'  to  pry  into  hi^  i)rivatc  business.  What  it  requires 
i^  a  little  diplomaey.  V.e  are  not  endeavoring!;  to  get  this  in- 
formation for  the  pur[K)M'  of  criticism;  what  we  want  to  know 

j-  who  is  receiving  the  outside and ,  and  if  we  knew 

it  would  put  us  in  a  [)ositi()n  U)  hel[)  you  p;et  the  busine         I 
want  you  to  make  a  -pecial  effort  in  this  matter,  and  sen 
Forni   114  every  day,  and  give  us  all  the  inform.ation 
possibly  can.    Kindly  hear  this  in  mind,  and  oblige. 
Yours,  truly, 

L B.  S ,  Manager. 

At  this  point  we  may  also  call  attention  to  certain  testimony  with 

regard  to  the  abuse  of  the inspcctiem  system  in  the  interest  of 

the  T .    X— —  X ,  who  for  many  years  was  si)ecial  agent 

(.1  the  r in  the  Decatur  (111.)  district,  having  a  considerable 

ttrritory  under  his  jurisdiction,  testified  (vol.  — ,  pp.  iJgS-nco) 

that   the  inspection  of in  his  territory  was  simply  a 

Idrce:  that  many  of  the  inspectors  did  not  have  instruments  fur 

in-pecting .  and  did  not  know  how  to  inspect  it,  and  had  no 

(ly>ire  to  do  so;  that  they  would  let  the  T itself  have  the  stencils 

(ior  branding  the  statement  of  inspection  on  barrels,  etc.)  and  use 

them,  without  any  actual  inspection.     He  said,  further,  that  

in-pectors   at    the   instance   of   the   T ,   sometimes   being   in- 


-of  com- 


tluenced  by  a  cigar  or  a  drink,  would  often  condemn  the 
petitors  although  it  wa>  up  to  th;-  legal  test,  and  thus  prevent  it 
sale.    He  mentioned  :in  instance  at  Vandalia  in  igoo  when  the  in- 
spector conelenmed  a  carload  of shipi)ed  in  by  the  U 

Cumpany,  although  as  a  matter  (.f  fact  the would  have  stood 

th(>  ■       " 


legal  test. 


GROUP  8 

Exhibit  1 


Cn.MPANY 


■  1 


The  Government  alleges  that: 

— .  and   the  other  officers  and  di- 


I  he  defendant, 
re-ctors  of   the   saifi   successive  corporation.- 


-,      from   time  to   time 

during  the  above  period,  caused  to  be    .aintained  and  did  maintain 

at  the  factory,  at , ,  a  display  room  known  as  the  "  C]ra\  e- 

'  Op.  cit.  U.  S.  V. Company.    Petition,  pp.  21-22  and  25. 


^66 


ImjUSTKIAL    ('OMHINAIIONS    AND    TRUSTS 


yard"  or  "Midway".  In  this  room  wore  shown  s  of  com- 
peting companies  which  had  been  forced  dui  of  business  by  the 
methods  above  set  out.  Prominent  display  cards  re[)ortin^  the 
names  of  these  companies,  the  liate  when  they  went  out  of  business 
and  the  amount  of  money  lost  by  them,  a!)peared  j)rominentlv  in 
the  e.\hil)it.  Manufat  turers  purposing  to  <;;)  into  the  busine— 
were  shmsn  this  di>phiy,  and  it  was  ])o'nted  out  to  ihem  by  the  said 
officers  and  their  a^ent>  as  the  fate  that  W(juhl  befall  any  company 
seel^int^  to  com{)ete  with  them. 

This  j)rocess  of  intimidatiuL;  nianulacturer>  wa>  known  as  the 
■'gkxjmin'^"  j)rocess,  imd  the  ninm  wa>  sometimes  known  as  the 
•■j^dooming"  room.  Thousands  of  merchants  and  other  visitors  in 
the  factory  were  shown  thi.-.  exhibit  and  told  that  it  would  be  useles- 

to  buy  iither s,  because  competing  concerns  would  soon  <,'(» 

out  of  bu>iness  and   fail  to  maintain   the  j^'uaranties  f^iven  witli 

their  s.     Said  officers  and  directors,  and  their  aj^ents,  pointed 

to  such  exhibit  as  a  warnin,;;  to  comju'tinj.;  manufacturers,  dealers, 
and  agents,  and  to  other  nersons  and  corporations  who  contem- 
plated  engaging    in    the    business   of    manufacturing   and    selling' 

s,  that  all  competition  eventually  would  be  suppressed,  and  that 

the  "graveyard"  would  t)e  the  destination  of  competitors. 

Said  exhibit  was  maintained  for  the  jnirpose  of  harassing  and 
disci)uraging  competitors,  and  for  the  purpose  of  injuring  and  sup- 
pressing their  trade  and  commerce. 


.  .     The  said  defendant, and  the  other  directors, 

managers,  ofhcers,  and  agents  of  said  successive  corporations,  in- 
cluding the  defendant  company,  for  the  purpo.se  and  with  the  in- 
tent of  intimidating  and  deterring  others  from  engaging  in  such 
trade  and  commerce,  and  of  injuring  and  suppressing  others  en- 
gaged therein,  have  from  time  to  time  published  and  caused  to  In- 
distributed  various  lists  j)ur])orting  to  contain  l!ie  names  of  variou- 

companies  which  have  ceased  engaging  in  such  trade  and 

commerce.  One  of  ^aid  lists  so  distributed  in  January,  1910, 
reads  in  part  as  follows: 


■  DKAD 


COMPANIES. 


Within  the  past    i^  years   lyS 
organized  to  compete  with  the  — 


companies  have  been 
Co.    Of  these. 


TkLM    .Mi;riiODS 


367 


15,^   havo   failed    in    Iiumiu-.- 

Sv7,^,vOoo.      I'lu'ir  combincc 

to  sworn  atiidavits  of  its  officers,  llic  Hoston 

alone  lo,t  Sigj,-5o.oS.    Of  every  jo ^  sold,  ly  arc 


I  heir  eonihined   capital   was 
OSS  wa-  .'SI, 070,000.     .Xrcording 

Co. 


If 


ExjniiiT  2 


CO. 

LETTKR   TO    THE   TR.'DK.  ' 

.  JaNTARV    15.    iQio. 

We  enclose  herewith  new  price  list  which  we  are  mailing;  to  the 
r<  tail  trade  to-day.  These  prices  are  subject  to  the  actual  catalogue 
(ii^count  and  the  casn  discount  only. 

We  also  enclose  memoranda  of  the  prices  at  which 


,  ,  and 


cases,  unc 


will  be  billed  in  future 


to  our  jobbers.  These  prices  are  net.  subject  to  the  cash  discount 
only. 

These  prices  are  confidential. 

I-or  the  best  interests  of  our  business  i:<c  have  (ktermined  to  sell  our 
^oods  exclusively  to  jobbers,  i.'hom  ice  find  volunlariiv  eonformin^  to 
I'ur  -dishes  as  to  the  disposition  by  them  of  such  goods':^ 

We  shall  make  all  specific  sales,  except  of ,  with- 
out any  restrictions  whatever. 

Whether  or  not  our  ivishes  as  hereinafter  stated  be  complied  with  ur 
shall  jrom  time  to  time  exercise  our  ri'^ht  to  select  the  jobbers  to  ichom 
lie  shall  s,ll  our  i^oods.  and  ice  shall,  irrespective  of  any  past  dealings, 
rejuse  to  sell  to  those  jobbers  u'ho,  in  our  opinion,  handle  our  goods  in  a 
manner  detrimental  to  our  interest  or  ichosc  dealin'[s  icith  u.^  arc  in  any 
oth-r  respects  unsatisfactory.'^ 

Our  present  wishes  areas  follows: 

First.  Our  goods  bearing  the  following  trademark-,  to  wit: -, 

7'  '  '  •  ^"'J •  '^^''"  ''•-■  •■'"''1  l>v  u>  to  our  jobbers 

at  iixed  prices,  subject  to  a  cash  discount,  and  we  desire  that  sales 
of  these  goods  by  jobbers,  whether  to  retailers  or  to  jobbers,  shall 
be  without  deviation  at  the  i)rices  fixed  by  us  for  sales  to  retailers 
subject  only  to  the  cash  discount. 

H'titlfd  Staki  of  Armriij  v. Co.  and  others,     i'etition  in 

f-quity,  In  the Court  of  the  United  Stales  for  the District  of 

pp.  14-15- 

-  lulics  are  the  Editor's. 


368  Tsin-STRIAI.    (\)MRIXAT!ONS    AND    TRUSTS 

Second. are  sold  only  unckr  the  terms  of  the  liccn- 


covering  thtir  sales. 

Third.  On  all  other  j^'oods  we  place  no  restrictions  as  to  the  prices 
at  which  thev  are  to  be  sold  by  jobbers. 

Fjurth.  And  further,  we  desire  that  the  jobbers  to  whom  we  .»cll 

our  jroods  bearing  the  following  trade-marks,  to  wit, , , 

and   ^Iidll  not  deal  in  an\ otlurthan 

those  manufactured  bv  us. 

Fifth.  .Ml  advertisements  of  our  goods  will  be  subject  to  our 
.Approval. 

Veiy  irulv,  vours, 

Tin:  — Company-. 


GROUP  g 

EXIUBII     I 


—    (  (iMl'WY 


The  Government  alleges  that; 

The  detendai .  and  llir  Mthcr  directors,  managers, 

and  officers  of  tiie  >aid  >ucces>ivt.'  C(-rporatit)ns,  from  time  to 
time,  during  the  above-named   period,  caused   In   be  built,  ami 

did  l)uil(l,   -s  to  resemble  iti  a  general  way  the  ap])earance  uf 

other  competing  s  and  to  produce  the  -ame  results  and  jht- 

form  the  -ame  functions.      I'he-e  s  were  not  built  orolTertii 

for  sale  in  good  faith,  but  for  the  >ole  iniqiose  of  kriockiiig()Ut 
comiK'ting  — -s  and  driving  compel ilors  from  the  lield.     Such 

s  were  -old  without  regard  to  the  cost  of  their  manufacture 

and  .It  -uch  jtrices  as  would  ruin  and  destroy  competitors;  and 
their  manufaclure  and  -ale  was  discontinued  .liter  the  competittir 
had  been  driven  out  of  liu>iiiess. 

These  machines  were  generally  known  as  "knockers,"  and  werr 

l>iit   into  the  field  whenever  a  new  made  by  a  comiu'tit' r 

appeared  on  the  market,  and  were  used  solely  for  the  iiun';>-^ 
of  destroying  the  business  of  such  competitor  and  of  interferini; 
with  contracts  made  by  siuh  competitors  with  purchases  of  their 
s. 


'  lulics.  beinning  with  "shall"  au-  the  Kilitor-i. 

'0|).  <ii    r  >'.  V. Co.    IVlilioii.  pp.  16-IQ,  i3-J4. 


Tr'jst  Mkthmds 


,3^^Q 


The  defendant. ,  and  the  otluT  dir.riors,  mana- 

f^ers,  officers  and  agents  of  the  said  successive  corporations,  from 
lime  to  time,  during  the  above-named  period,  pursued  the  policy  of 

advertising  for  >ale  s  maiuifaclurfd  l)y  C(jnii)..'titors,  at  i)rices 

below   the  cost  of   manufacture,   and   below   thr   prices   paid   for 

Mich  registers The^e  conii)eting >  v.cre  ac(|uired  bv  the 

ilrlcndant  comi)any  and  its  predecessors  fmm  'lu-rchant^  who' had 
I'lirchased  them  of  comi)etitors,  and  from  dialiT-  and  agents  of 
ciiinpeting  - — s  whom  the\-  had  either  forcid  dul  of  busTne.-s  by 
threats  or  intimidations,  or  whose  business  thev  had  purchased  foV 

large  sums  of  money.     Such s,  when  s(.  acquired,  were  then 

advertised  and  otTercd  for  sale-  at  ^uch  greallv  reduced  \)rkv^  for  the 
-ulf  pun)ose  of  injuring  and  discouraging  siich  comivtitors  and  of 
ih-iouraging  and  forcing  them  out  of  bu>ines>;  and  said  directors, 

managers,  and  officers  al-o  j)ursued  tlu-  policy  of  e>tablishing '■ 

agencies  in  the  immediati'  neighborhood  of  competing  dealers  and 

uf  so  advertising  and  so  selling s  dealt   in  bv  ^uch  dealer.-. 

and,  aftiT  forcing  >uch  <_om|)cting  dealer>  out  <i|  business,  by 
the  method.^  above  set  forth,  the  agencies  whi<  h  were  mi  i-'tab'- 
li-hed  were  discontinued. 

Such  directors,  managers,  and  officer^  al.-o  in-tructed  and  di- 
rnle(i  their  agents  to  [)ur-ue  the  i)ractice  of  tlirealeiiing  to  establish 
>i;;encies  in  the  immediate  neighborhood  of  (ompi.ing  dealers,  and 
ctusing  competitors  to  fear  linancial  los.-e-  whieh  would  ei'i-ue, 
have  thereby  forced  such  competitors  out  of  business. 


The  defendant,  ■- and  the  other  directf)rs,  mana- 

Uirs,  and  otlicers  of  the  said  successive  i<irp<irations  have,  from 
time  to  time,  caused  to  be  hdd  and  have  held  vaiiou-  ((inventions, 
meetings,  and  conferences  winch  were  atteiuUd  by  agt  tits  and  other 
("'ployees,  and  at  whi-h  the  scheme^  .md  ijlaiis  lor  i)re\enting  and 
destroying  competition  and  of  creating  a  n'iono|)o|v  were  discussed, 
'.'id  at  which  said  agents  .md  iiiii)loyees  were  in'strutted  and  di' 

''•■  I'll  to  hinder  and  pre\int  the  sale  of s  by  lompeting  com- 

iMiiies,  agents,  and  dealers,  and  ,it    whid,   Midi  agents  and  em 
I'loyees  were  instructed  and  directtd  to  pursue  the  \-arious  v  rongfu! 
and  unlawful  methods  herein  s,i  tortb. 

The  said  directors,  managir.s,  and  officers  .iIm)  caused  to  he  sent 
"Ut.  and  did  send  out.  various  letters  of  instruction  to  their  agents 


I  I 


Si 


.S/' 


IXDUSTRIAI,    ("<■•.: r.IXATIOXS    AXD   TrL'STS 


and  <.nr.Ioyccs  .lircclin.^  tl,cm  as  to  furtlH-r  methods  of  obstructing 
ana  Mipiircssm/j;  the  irade  of  comix'tilnrs  ^ 

'I  he  said  .iircctors    managers,  and  officers,  from  time  to  time 
dunn.  the  sa.d  per.od,  caused  to  he  published  .u:d  did  ,,ubl    h  a 

paper  known  as  -  The .-  whieh  was  sent  out  to   ir^e  ts  . 

contKlentud  n^attcx  and  uhi.h  v.as  intended  to  be^lncl  wis  r " 
Sarded  as  a  pruUe.i  letter  of  instruction.  The  directions  given  by 
he  managers  and  ofl.eers  of  said  successive  corporations,  and  va- 
nubW  li'T  l''  '"''  ^^^''.-"^nt.  of  such  managers  and  officers,  we^. 
publ  shed  therem  and  their  Niews  given  circulation  amon-.  th 
agents  through  the  meduun  -f  this  juurnal.  Thi>  publicat  o 
fre,,uently  amuamced   the   intent  and  policv  of  such   d   ectc^ 

managers,   and   otlicers   to   monopolize   the  ' inclusm     ar  j 

by  means  ot  said  journal  agents  were  imbued  with  the  M.i'ri't  and 

m  the         "r^"       "';'"'"''■  ""'.  ^"  "^^•'"^^'  "^'^^''-  --ix-tilo 
■aZ        ~T        '"'''■'  ^>'  ^^■'"""«'"1  '">d  unlawful  method  .    Said 
.agents    m  other  ways,  were  directed,  advised,  and  instructed  bv 
such  directors,  managers,  and  officers  to  pursue  a  war  of  e.te, 
m.nalion  against  all  competitors,  and  were  threatened  with'  i  .' 

Zirl^l:^''' sT'V'''  '"''T'"'"^  competition  to  exist  in 
tluir  territory.  Said  agents,  so  advised  and  instructed  in  such 
meetings  and  through  such  letters  and  publications  an  Iby  other 
means,  thereupon  carried  out  and  assi.'t.d  in  earrving  out  such 
plan,  and  i^urpo.ses  ot  such  directors,  manager-.  aiur<,thcers 


and   the  oiIut  directors,  ofTi- 


The   defendant,    —  

1  -    ,  '    i*'t^4    i,n\^   i^LiKi    tiueeior.s    otfi- 

cers,  and  agents  ,.t  the  said  successive  corporations  have,  from  time 

o    .me.  during  the  above-named  period;  threatene.l  to    nTitut 

..nd    base  instituted   and  cau>e.]   to   be   instituted,   various     ut^ 

agarns    competitors  dealers,  and  manufacturers,  for  the^?e^  ! 

Such  direct..rs,  managers,  anr]  ..fficers  instituted  such  unwar- 

^^^:;::tiTT'''^''  -^"'^^  \'^^::  '^^^""^^'  -•»  -'^'^  ^^e  y,^  , 

Kation  of  the  sooner  being  able  to  crush  competitors,  and  as  a  result 
hereof,  of  purchasing  the  business  of  such  cl.mi.etitors  ar^  m.Idna 
he  disnussal  of  such  suits  a  part  of  the  considenxtion  for  tie  agr  "^ 

And  .uch  directors,  managers,  and  uffiters,  from  time  to  time, 


Tklsi  Mktiiods 


371 


iluring  the  above-named  [jeriod,  c-.)n>[)ire.l  and  a;,'reed  with  various 
.1  tile  persons  so  sued  by  tiiem  and  \vh()se  Inisiness  they  had  secretly 
purthased,  that  such  j)ersons  ;di<)uld  not  hereafter  make  any  <lelense 
U>  such  suits,  or  make  only  such  defense  as  would  enable  the  suc- 
ce-~iye  corporations  to  obtain  judgments  in  their  favor. 

Said  (hrectors,  managers,  and  ofTiccrs  would  cause  the  result  of 
such  collusive  judgments  to  be  advertised  and  did  widely  advertise 
the  securing  of  such  judgments,  f<T  the  purjio^e  of  lurlher  threaten- 
ing and  harassing  comi)eting  manufacturers,  their  dealers,  and 
■i/cnts,  and  the  u.-ers  of  competing s. 


.1! 
I  - 
:  I 
II 


and  the  other  directors,  mana- 


The  defendant. —  — 

frcTs.  officers,  and  agents  of  thi'  said  successive  corporations  have, 
alter  a  long  series  of  a.^^saults  upon  competing  manufacturers, 
'Irak  rs,  and  agents,  by  the  methods  and  means  a])ove  set  out,  and 
l.\  other  methods,  coerced,  persuaded,  and  prevailed  upon  them 

to  cease   manufacturing  and  selling  or  h;.ndling  the  >.ime; 

,.n(!  Slid  directors,  managers,  and  officers  ha\e  caused  to  be  paid 
.:'  d  tia\e  paid  out  of  the  treasuries  of  said  successive  cor])ora- 
liiMis  large  sums  of  money  to  various  manm  ;  turers  and  dealers 
in  consideration  of  the  purchase  of  tht  ir  business  and  agreement  to 
ahandon  the  same  and  thereafter  not  to  engage  in  such  business. 

Said  (Hrectors,  managers,  otTicers.  and  agents,  in  the  manner 
aijove  set  out,  also  coerced,  pt  rsuaded,  ;ind  prevailed  upon  various 
agents  of  competing  comp.inies  lo  vinjate  tlu'ir  contracts  of  em- 
plnyment  with  c<Miipetitors  and  to  abandon  their  employment, 
iiid  have  [)ai(l  such  agents  large  sums  of  money  for  -o  doing:  and 
have,  in  consideration  of  their  abandonmi  nt"  of  such  contracts 
and  such  employment,  [-.romisi  d  and  given  to  >uch  agents  employ- 
ment. 

Kx.MiHii  2 


rOMP AW  ' 

The  Government  alleges  that: 
Some  time  during  the  year  iqo5  a  large  number  of  produn  rs  of 
-  caused  to  be  organizi'd  undt  r  llie  laws  of 


of 


and 


•  VnitFd  ^iiiUts  of  A„urii,t  v. Company  rt  al.     ['etition  in 

tquiiy.  In  the Court  of  the  United  Stales,  for  the Division  of  the 

Uislrict  of ,  |)|).  ii-ij. 


hi 


il^ 


Industrial  Combinations  and  Trusts 


the  State  of  Florida  a  distributinji  company,  known  as  tlie  —  - 

Export  Company,  with  a  lari,'e  capital  stocl<,  the  avowed 

purpose  of  this  orjjanizalinn  on  the  part  of  the  producers  beini? 

to  create  a  normal  competilitm  and  to  free  the  trade  in  ,,f 

and  from  the  grasp  of  the  aforesaid  combination  and 

monopoly,  and  to  steady  the  market  prices  in ,jf  - ;ip,i 

,  and  to  render  the  business  of  the  producer  less  precarious  Lii.i 
less  hazardous. 

Thereupon,  as  soon  as  the  said Export  Company  ir- 

tered  mto  active  l)u>iness,  the  aforesaid  S. Comi)any    

Company, A and & ,  S.  S- 


and 


entered  inti 


,      ,                   ^'i^-'  'K'fcest  trade  v.arfare  against  said 
company,  and  a-bitrarily  nm  the  i)rice3  of of  and 

in  the  producing  section  up  far  beyond  anv  actual  \-alue  anr| 
by  asysteni  ot  spying  upon  said Export  Companv  as- 
certained who  Its  customers  wire,  and  otTered of  — '  and 

—  to  saitl  customers  far  below  thf  actual  co>t  of  the  same;  and 
said  —  Export  Company,  being  thu-^  unable  to  ili-^pom-  ,i< 

Its  stock  ol ol  and      -— .  accumulated  a  large  quantity 

Uiereol,  a  great  part  oi  which  was  hvpothecated  to  the  bank' 
I  hereupon  the  S. Company  and  others,  by  unfair  manipula- 
tion, caused  the  Savarmah  market  to  decline  abnormally  actiiallv 

causing  the  quotations  in of to  l>e  reduced  (o  per  cen! 

in  two  weeks,  which  .Krliiie  in  ,he  market  caused  the  banks  to 

call  upon  the ■ hxp,ort  Company  for  additional  margir^ 

which  it  was  unable  to  put  up,  and  the  -^ Export  Companv 

was  thus  compelled  to  sell  out  all  of  its  accumulated  stock  in '- 

of         -  ;nid    to  the  aforesaid  combination  at  ^uch  a  loss  tint 

Its  capital  .loek  w,is  almost  entirely  wiped  out.    .Said  combination 

then  and  there  exacted  In.m  the Export  Company  a 

written  contract  not  to  further  engage  in  {\u-  business  of  buyinir 

shipping   and  selling  of  .,„d for  a  perio<l  ot^  Uy', 

years,  which  left  the  aforesaid  combination  in  almost  comnletr 
control  ol  the  distributing  part  of  the  interstate  and  foreign  com- 
merce in of and . 

The  combination  then  attacked  all  the  f.'w  remaining  competitor^ 
It  had  with  a  system  <,f  >:pying  and  bv  ,,ther  unlair  methods  of  com- 
pention,  such  as  overbid.iing  weak  competitor^  in  the  jiiirchase  of 

,     ,, '?  ''"d '  «»"'!  ofTering  to  undersell  \seak  competitors 

to  their  customers,  and  arliitrarily  bidchng  the  Savaiuuh  nurkel 


Trust  Methods 


373 


up  or  down  as  suited  its  purpose;  ;md  wa,-  thu.>  enabled  to  acquire 
(untrol  and  did  control  approximately  (;c  jjer  cent  of  the  American 
jifijducl  in of and . 

Exhibit  3 
consolidation  coai,  company  ' 

The  Baltim(/rc  and  Ohio  Raii:-oad  Company  owns  somcthinc;  over 
5:  per  cent  of  llu  capital  stoc!;  of  the  C'on-oiidation  Coal  Company, 
which  was  acfiuircd  about  i.s;^.  and  thus  it  controls  the  coal  com- 
j)any  and  the  Cumberland  and  IV^nnsyhania  Railroad  Company 
IP-  97';)-  The  Consolidation  Coal  Comijany  is  a  large  miner  of 
oial  (pp.  87c;"SSo,  2177).     I"  1004  it  mined  1, 8^3,371  tons. 

In  igo4  the  Cons(»lidation  Coal  Company  acfiuired  a  majority  of 
the  stock  of  the  Metropolitan  Coal  Com.papy  ^n  Boston  (p.  879), 
which  latter  com])any  is  en,t,'a,[,'ed  in  the  retail  trade,  buying  coal 
1.  o.  b.  Baltimore  or  Philadelphia,  as  the  case  may  be.  and' carrying 
the  same  to  Boston  and  there  tUstributing  it,  bv  retail,  to  the  trade 
;tt  that  point  and  interior  towns  Cpp.  CS85-8S6).'  The  Consolidation 
Cnal  Company  has  barges  which  are  occasionally  used  in  carrying 
ihe  coal  for  the  ^fetropolitan  Coal  Company.' but  usually  it  is 
carried  in  vessels  chartered  by  the  latter  company  (p.  SS6).  In  lyo -: 
the  Consolidation  Coal  Company  acquired  a  majority  of  thi' 
^tock  of  the  Somerset  Coal  Comi)any.  paying  therefor  the  sum  of 
$.'-'.50  per  share  (p.  975).  (Minute  book  of  the  Consohdation 
Coal  Company.) 


niK    FAIRMONT   COAT.    COMrxNV. 

I  )n  the  20th  day  of  June.  1001,  the  l-'.iirmont  Coal  Company  was 
organized,  and  as  of  July  i,  igoi  (p.  939),  pun  ha>ed  a  large  amount 
ot"  coal  property  upon  which  were  located  .-onie  35  mines,  more  or 
li<s,  from  Mr.  C.  W.  Watson  and  others  (p.  (,41,  etc.)  The  coal 
produced  by  the>e  nJnes  anKJUnied  {'<  a  \ery  large  tonnage,  to 
wit: 


Tons. 

3.Q,S4.2i7 

...  3,691-78 1 

...3,750.170 

Ki'porl  on  Discriminations  and  .MonojKjIies  in  Coal  and  Oil.     Intt.r.^tate 
11  r(  f  Commission,  Re|)ort  of  January  ^5,  kjo;,  pp.  S-u. 


1902  , 

1903  , 

1904  , 


374 


InuUSTRIAI.    CitMlilNATIONS    AND    TklSTS 


The  property  \va>  transferred  to  tlie  I-airniont  Coal  Company 
free  of  debt,  except  8475,000.  secure  by  mortgage  on  the  [)roperty. 
(Minutes  of  the  Fairmont  C(jal  Company.) 

In  the  yea.r  uio.:;  the  Fairmont  Coal  Company  also  purchased  the 
control  of  the  Clarksburg  Fuel  Company  (p.  S;,'-;),  which  latter 
company  was  incorporated  under  the  laws  of  the  Slate  of  We^t 
Virginia  on  the  lOth  day  of  September,  ujoi,  to  engage  in  mining 
and  selling  coal  and  jnanufacturing  coke.  It  owns  a  number  of 
coal  properties  which  produce  about  800,000  tons  of  coal  i)er  year. 
(Cramp.  .Mitchell  &  Serrill'i  .Manual  of  Statistics,  iqos,  jij).  444- 
445-) 

The  Fairmont  Coal  Company  owns  about  ,^.3,000  acres  of  bitu- 
minous coal  lands  and  controls  by  lease  about  J4.gS()  acres,  and 
also  has  interests  leased  to  it  by  t'he  .^b)^ongahela  Railroad  Com- 
pany and  by  the  .Monongah  Company.  (See  Cramp.  Mitchell  & 
Serriil's  Manual  of  Statistics.   IQ05,  p.   501.) 


Tin.    NOR  niWISTKRN    VXV.L    COMPAXY. 

^The  Fairmont  Coal  Company  also  owns  ([)p.  ;/)5,  .Syg")  the 
Northwe-tern  Fuel  Company,  which  is  a  C()r[)oration  formed  under 
the  laws  of  the  State  of  Wisconsin,  on  the  jSth  day  of  October, 
igoi,  and  v.hieh  i^  the  successor  of  a  Minnesota  C(ir])oration  of  the 
same  name.  The  business  of  the  company  is  the  forwarding,  si  r- 
age,  selling,  and  retail  distribution  of  coal  and  the  manufacture  and 
sale  of  coke  for  Chicago  and  the  Lakes  (pp.  882,  885).  This  com- 
I)any  has  docks  on  Lake  Michigan  and  Lake  Superior,  at  Duluth, 
West  Superior,  Milwaukee,  possibly  .Ashland,  and  other  points,  and 
has  a  hard-coal  breaker  at  Chicago  (i)p.  882-8S4.  etc.)  and  handles 
not  only  the  coal  ..f  t!ic  Fairmont  Coal  Company,  but  that  of  other 
C(-rnpanies,  and  during  kjos.  handled  about  '2,500,0-^0  tons,  of 
which,  the  Fairmont  Coal  Company  and  its  associate  comi)anies 
furnished  about  800,000  tons.  About  100,000  tons  were  purchased 
from  independent  operators  alonj;  the  lines  of  the  Haltimore  nnd 
Ohio  Railroad  (p.  885.) 

Thi'  wharves  and  docks  of  the  Xorthwestern  Fuel  Company  are 
u>ed  by  the  Fairmont  Coal  Company  and  its  associate  comp.inies 
for  storing  large  amounts  of  coal,  which  are  shipped  in  the  summer 
time  for  distriI)utioii  when  the  winter  approaches,  (.See  Cramp, 
Mitchell  iV  .Serriil's  Manual  of  Statistics,  1905,  p.  632.) 


Trust  Methods 


375 


THE   PITTSBURG    AND    FAIR.M(\NT    FUEL   COMPAN'Y. 

In  June  or  July.  i(;04,  the  Pitlsburj;  and  Fairinuiit  Vuvi  Company 
was  shipping  coal  at  the  rate  of  something  over  300,000  tons  per 
year.  Previous  to  that  time  it  had  been  selHng  its  coal  through  the 
lairmont  Coal  Company  and  had  been  getting  the  u^e  of  certain 
individual  cars  '^'vned  by  the  Fairmont  Coal  Company,  which 
1  itler  company  c'etermined  to  put  an  end  to  this  relationship,  and 
iiiunediately  thereafter  a  majority  of  the  capital  stock  of  the  Pitts- 
Imrg  and  I^'air-iont  P\iel  Company  was  -old  to  the  Fairmont  Coal 
Company  for  6.  {pp.  ()04,  gii).  Mr.  C.  W.  Watson  the  president 
>  !'  the  Fairmont  Coal  Company,  states  that  there  were  other  con- 
siderations, in  that  they  aided  the  Pittsburg  and  Fairmont  Fuel 
Company  in  its  fmances. 

it  would  seem  that  af:er  the  notice  of  the  Fairmont  Coal  Com- 
jiany  to  the  Pittsburg  and  Fairmont  Fuel  Company,  that  the  first- 
named  com])any  would  cease  acting  as  its  sales  agent  and  would 
ridt  allow  it  the  use  of  the  equipment  controlled  l)y  the  Fairmont 
Coal  Comi)any,  the  stockholders  of  the  Pittsburg  and  Fairmont 
Fue'  Company  practically  gavi'  to  the  I'airmont  Coal  Company  a 
majority  of  the  stock  of  the  Fuel  Company,  and  the  natural  in- 
iiTencc  is  that  the  stockholders  were  afraid  that  their  tonnage  might 
he  decreased  unless  the  alliance  with  the  Fairmont  Coal  Company 
was  strengthened  and  continued. 


SOUTHERN   COAI.    AND   TRANSPORTATION   COMPANY. 

The  Consolidation  Coal  Company  owns  :?,5oi  '-liares  out  of  5,000 
shares  of  the  capital  stock  of  the  Southern  Coal  ,ind  rran>portation 
Company  (pp.  1002,  ioot)\  which  latter  company  owns  about 
4,Soo  acres  of  coal  lands  in  Barbour  County,  W.  Va.,  with  its  mines 
near  Berryburg.  The  coal  is  of  the  Pitt>t)urg  vein  {p.  :So6),  and  in 
the  latter  ])art  of  1905  the  managers  of  the  Southern  Coal  and 
Transportation  ('ompany,  finding  that  they  were  not  getting  along 
prosperously  on  account  of  the  fact  that  they  could  not  get  sufficient 
car  service  on  the  Baltimore  and  Ohio  Railroad  (p.  280),  determined 
to  ^ell  out  their  pro])erties,  and  thereafter  a  contract  was  made  by 
.Mr.  B.  F.  Berry,  the  proident  of  the  com[)any,  to  sell  the  entire 
capital  stock,  t(>gether  with,  all  of  the  bonds  of  the  company,  to 
Messrs.  J.  H.  Wheelwright  and  C.  W.  Watson  (p.  :Sii)  for  the" sum 
of  8375,000  (i)p.  2S10,  1009-1010). 


j/' 


I.NUISTRIAL   COMIUXATIOXS   AND    TRUSTS 


Mr.  C.  VV.  Watson  was  the  proiJent  of  the  Consolidation  Coal 
Companyand  Mr.  J.  II.  \Viiei-l\vrii;ht  was  the  vice-proident  thereof, 
and  immediately  after  the  [)urchase  of  the  stock  and  bonds  of  the 
Southern  Coal  it  Transi  ortation  Company,  Messrs.  Watson  an(i 
Wheelwright  sold  2,501  shares  of  the  stock  out  of  the  5,000  -hares 
and  all  the  bonds  of  the  com[)any  to  the  Consolidation  Coal  Com- 
pany for  the  sum  of  8400,000. 

It  woukl  appear  from  the  evidence  of  Mr.  C.  W.  Watson  (p.  1007, 
etc.)  that  it  was  a^rreed  that  the  S:^.ooo  cash  payment,  apparently 
realized  by  him  and  Mr.  Wheelwri;,dit.  was  to  be  put  in  the  treasury 
of  the  Southern  Coal  and  Transportation  Comi)anv,  and  it  is  not 
clear  whether  the  mortgaj^e  indebtedness  of  the  'Southern  Coal 
and  Transportation  Company,  amounting  to  S500.000,  was  canceled 
or  not  (p._  ioioi,_  !)ut  there  was  an  understanding  that  there  might 
be  a  new  issue  of  bonds,  in  lieu  (jf  the  S500.000  of  mortgage  bonds, 
for  the  purpose  of  paying  back  to  the  Consolidation  Coal  Company 
the  money  that  it  had  invested  {p.  loi.O.  and  out  of  the  transaction 
it  would  appear  that  Messrs.  Watson  and  Wheelwright  made  a 
profit  of  2,499  >liares  of  the  capital  stock  of  the  company. 

It  also  appears  that  the  original  owners  of  the  Southern  Coal  and 
Transportation  Company  had  about  S500.000  invested  (p.  2S06), 
and  that  they  had  Ijeen  engaged  in  mining  at  that  point  for  three  or 
four  years  (p.  2S07),  and  that  their  whole  diOiculty  was  an  insuffi- 
cient car  service  from  the  Baltimore  and  Ohio  Railroad  (i)p.  2S07- 
2S09),  and  \n  selling  out  the  i)roperty  the  original  stockholder> 
sacrificed  their  interes*  ai.d  lost  money  on  the  transaction  (pp.  2S10, 
281 1),  and  that  the  proj^Tty  would  have  been  worth  much  more 
on  any  railroad  that  furnished  equipment  to  take  care  of  the  output 
(l)p.   2811-2S12.) 

From  the  foregoing  it  will  appear  that  the  Fairmont  Coal  Com- 
pany owns  or  controls  the  Clarksburg  Fuel  Companv,  the  Xorth- 
western  Fuel  Comjiany,  and  the  Pittsburg  and  Fairmont  Fuel 
Comi)any,  and  that  the  Consolidation  Coal  Company  owns,  or  con- 
trols, the  Somerset  Coal  Company,  the  Metropolitan  Coal  Com- 
pany, the  Cumberland  and  Pennsylvania  Railroad  Company,  and 
the  Southern  Coal  and  Transportation  Company,  and,  in  addition, 
mines  of  its  own  in  the  Cumberland  liistrict. 

.\bout  the  ist  of  January,  190,3,  the  Consolidation  Coal  Com- 
pany bought  a  majority  of  the  stock  of  the  Fairmont  Coal  Companv 
at  S47.50  per  share  (p.  975).  Tlu-  eanital  stock  of  the  Fairmont 
Coal  Company  was  812,000,000,  and  the  (,'onsolidation  Coai  Com- 


Trust  Mktuods 


377 


p:iny  acquirer!  So.ooo.ioo.  In  the  year  1902  the  output  of  tl.c  Fair- 
niunt  Coal  Company  from  the  ,^7  mines  controlled  by  it  amounted 
to  3,800,000  loHN  and  it  \Va>  estimated  that  the  annual  capacity 
was  5  000,000  tons.  The  purchase  was  made  by  the  Consolidation 
(-oal  Company  from  Mes>r.s.  A.  H.  Fleming,  S.  L.  Watson  J  F 
Watson,  C.  W.  Watson,  and  J.  H.  Wheelwright  (Minutes 'of  the 
Consolidation  Coal  Company,,  and  by  this  latter  purcha>e  the 
(  un>olidation  Coal  Company  acciuired  control  of  all  the  properties 
ul   the   l-airnKHit   Coal   Company. 

Hy  its  owner-^hij)  of  52  per  cent  of  the  capital  stock  of  the  Con- 
M.hdation  Coal  Company  (p.  973)  the  Baltimore  a-d  Ohio  Rail- 
road Company  controls  all  of  the  property  and  mines  of  that  com- 
pany, includinir  the  railn.  1  of  the  Cumlu-rland  and  I'enn>ylyania 
Kailroad  Company,  and  in  addition  it  controls  ;di  .,f  the  pro[)er- 
iies  and  mines  of  the  Fairmont  Coal  Company  and  its  >ub-i(iiary 
companies,  and  also  the  .Metro[)olitan  Coal  Company,  a  retailer 
"f  coal  at  Boston,  and  the  Northwestern  I'uel  Company  a  dis- 
tributor of  coal  on  the  CJreat  Lakes. 


E.XJIIBIT  4 
AMERICAN   SUGAR    RF.FIXIXC  COMPANY  1 

Mr.  Garrett.  Will  you  giyc  us  the  story  of  that  in  your  own 
way— the  transaction  through  Mr.  Kissel  in  regard  thereto  and  the 
entire  story. 

^  Mr.  Segai..  The  Pcnnsylyania  Sugar  Refinery  consisted  of 
^3.000,000  ol  bonds  and  85,000,000  of  stock.  '  Fiye  hundred 
t__housand  dollars  of  those  I'onds  should  remain  in  the  trea'^ury 
S.\5oo,ooo  oi  the  bonds  should  be  sold.  But  ihoM'  bonds  were  not 
expected  to  sell  at  par.  and  those  bonds  had  been  sold  at  a  figure 
and  the  stock  as  a  bonus. 

Mr.  Segal.  Xo;  as  a  bonus  with  the  bonds.  N'one  of  the  stock 
has  been  sold.  We  started  to  build  that  refinery,  and  1  had  a  hard 
time  to  sell  the  ])onds.  because  wheneyer  I  went  or  mv  i)eople  went 
t-'  >ell  some  of  the  bonds  something  happened  that  we  were  stoi)ped 

Mr.  Garrett.  What  would  happen? 

Mr.  Segal.  Kyerything  was  satisfactory,  and  within  the  next 
!  hours  they  did  not  want  them. 

'UpriiiR^  held  before  ilu-  ,S|HTial  rommiltee  <in  llir  Investigation  of  the 
American  Supir  Rcfinini;  ComiKiny  and  uihtrs.  ojiid  ConL'.,  i^i  i,i;«  luio- 
iQl I,  Vol.  2,  pp.  1^76-1  185.  ■     ^ 


i/^ 


Lnuustrial  Combinations  and  Trusts 


Mr.  Garrett.  What  reasons  did  they  give?  Were  any  reason: 
given  to  you  at  any  time? 

Mr.  Segal.  No. 

Mr.  Garri:,tt.  How  many  attempts  did  you  make  to  negotiate 
these  bonds  when  you  were  checked  in  that  way? 

Mr.  Segal.  Oh,  many  times,  many  times. 

Mr.  Carre  IT.  Ha\e  you  any  ojiinion  or  information  as  to  why 
everything  would  be  all  right  now  and  in  ^4  hours  they  would  say 
they  did  not  want  the  bonds? 

Mr.  Segal.  Xaturally  1  thought  somebody  did  it. 

Mr.  Garrett.  Did  you  have  any  <3[)inion?  Give  us  your  opinion 
as  to  who  you  thought  it  was  and  as  to  why  you  >o  thought. 

Mr.  Segal.  I  thought  it  came  from  ^Ir.  Havemeyer. 

Mr.  Garrett.  And  because  you  thought  he  wanted  to  check 
that  competition? 

Mr.  Segal.  Oh,  naturally. 

Mr.  Garrett.  Did  you  have  any  other  reason  than  a  mere  sur- 
mise? Did  you  see  any  evidence  of  his  handiwork  or  the  handi- 
work of  his  agents  anywhere  in  blocking  your  sales  of  these  bonds 
that  you  can  now  recall? 

Mr.   Segal.  I  thought  so. 

Mr.  Garkj:tt.  Could  you  give  the  committee  any  incident  that 
occurred? 

Mr.  Segal.  No;  I  could  not. 

Mr.  Garrett.  Where  did  you  endeavor  to  market  these  bonds? 

Mr.  Segal.  Oh,  in  dilTerent  [)laces. 

Mr.  Garrett.  In  Nevv  York? 

Mr.  Segal.  1  had  peonle  who  did  the  banking  business  for  me  in 
different  places. 

Mr.  Garrett.  New  York,  I  presume? 

Mr.  Segal.  Yes. 

Mr.  Garrett.  And  Philadelphia? 

Mr.  Segal.  Yes. 

Mr.  Garrett.  Boston? 

Mr.   Segal.  I  do  not  remember. 

Mr.  Garrett.  Do  you  know  whether  any  offer  was  made  at 
Bostiin? 

Mr.  Segal.  I  do  not  think  so. 

Mr.  Garrett.  Now,  go  ahead;  you  had  reached  the  point  where 
you  said  you  were  blocked  in  the  selling  of  bonds. 

Mr.  Segal.  In  the  meantime,  I  went  on  with  my  work,  and  I 


Trust  Mi;tiu)Dj: 


379 


nearly  tinishcd  thai  refinery;  but  I  needed  monev,  and  1  had  a 
Iran-acticMi  with  a  Mr.  KJsicl,  in  New  \urk,  that  had  nothing  to  do 
with  the   su^'ar  business. 

Mr.  Garkktt.  What  character  of  transaction  was  that? 

Mr.  Si:G\L.  lie  Icjaned  nic  8^50,000  for  On  days.  That  had 
nothing  to  do  with  the  sugar  business. 

Mr.  Garrett.  When  was  that  transaction  with  Mr.  Kissel,  if 
you    please,    Mr.    Segal? 

Mr.  Edmuxds.  I  suppose  you  want  to  know  with  reference  to  the 
I'l-nnsylvania  Sugar  Relining  Co.? 

Mr.  Garrett.  No;  I  want  to  know  with  reference  to  this 
8:50.000  transaction. 

.•\bout  when  was  that  Mr.  Segal? 

.Mr.  Edmunds.  I  think,  if  you  will  pardon  a  suggestion,  if  you 
will  ask  Mr.  Segal  how  long  before  the  8250,000  transaction  oc- 
curred he  went  into  the  sugar  relining  company,  he  may  be  able 
t>>  answer  your  question. 

Mr.  Garrett.  Can  you  tell  me  how  long  before  the  Pennsylvania 
Sugar  Retining  Co.  deal  it  was  that  this  $250,000  loan  was  made 
to  you  by  Mr.  Kissel? 

Mr.  Segal.  Sixty  days. 

Mr.  Garrett.  Sixty  days  before? 

Mr.  Segal.  Sixty  days  before.  I  borrowed  that  $250,000  for  60 
fl.iyr^.  In  the  meantime,  I  went  over  to  New  York  and  spoke  to 
Mr.  Kissel  about  buying  some  of  tb  e  sugar  bonds,  and  he  said 
he  was  not  interested.  But  live  or  six  days  before  the  $250,000  was 
(iuc,  his  private  secretary  called  me  on  the  jihone  and  he  said, 
"''''-  Segal,  there  is  8250,000  of  yours  due  in  a  few  days."  I  said, 
low  it;  I  will  pay  it."     He  said,  "When  will  you  be  coming 


'  Mr. 
"1  know- 


over  to  Xew  York?"  I  said.  "I  have  nothing  to  do  at  present  in 
Niw  York."  He  said,  "You  come  over;  Mr.  Kissel  wants  to 
see  you."  I  came  over  there  in  a  few  days,  and  went  over  to  his 
hini.-e,  and  he  told  me,  "That  8250,000  is'due."  I  said,  "I  know- 
it  '  I  ^aid,  "Your  secretary  spoke  to  me  about  it,  and  I  wi!!  pay 
it."  He  said,  "What  are  you  doing  now?"  I  said,  "I  am  busy." 
He  wanted  to  know  how-  much  work  I  had  at  that  time,  and  I 
told  him  I  had  So.ooo.ooo  or  87,000,000.  He  wanted  to  know  how 
many  men  I  employed,  and  I  said.  "I  don't  know;  probably  2.000." 
That  is  not  all  sugar  business,  you  understand.  He  said,  "How 
much  money  do  you  need!"  I  said,  "I  could  u>e  8500,000  or 
Sooo.ooo."    He  said,  "  Couldn"t  yuu  use  more?  "    I  said,  "  Probably 


;8o 


IxorSTklAL    CuMlilNAriONS    AND   TkI'STS 


8750,000."  "Xo,"  lu'  said,  "f<ir  tlu'  whole  work  you  are  floin^, 
you  nucil  niDrc  money;  8750,000  i>  not  enough.  "  1  said,  "  I  protiahly 
could  use  Si, 000, 000."  He  said,  "■  I  "  I '  don't.  >ee  how  you  can  gel 
on  with  your  work  with  .Si, 000, 000.""  1  said-well,  anyhow,  we 
put  it  down  at  .81,250,000.  He  said,  "What  have  you  <];<Jt  to  |)ut 
up?"  He  said,  "  Wiio  ha>  j,'ot  the  control?"  1  says,  "  Rif^ht 
here."     Strange,  1  ju-t  had  the  control  in  my  pocket. 

Mr.  (i AKKi:rr.    Vhv  control  of  what? 

Mr.  Sk(.al.  Of  the  suj^ar  rel'inery.     1  had   it   in  an  envelu|)c. 

Mr.  CiAKRKTT.  Vou  had  the  bonds? 

Mr.  Si:(;ai..   .\o;  I  had  the  stock.     The  stock  belonged  to  me. 

Mr.  GARKi.rr.  The  entire  stock? 

Mr.  Si:(JAL.  The  control.  He  >aid,  "Who  has  got  control  in 
that  refinery?"  I  says,  "I  ha\e.""  He  said,  "Will  you  be  willing 
to  put  up  the  control?"  1  said,  "Ves."  He  said,  "What  else 
have  you  got?  Have  you  got  some  of  the  bonds?"  I  said,  "  1  have 
got  8500,000  of  the  bonds."  He  say^,  "What  have  you  got  in 
the  line  of  the  hotiT?"  I  was  building  a  big  hotel  then.  I  said, 
"  I  have  got  the  bonds."  He  said,  "  Will  you  be  willing  to  put  up 
those?"   I  said,  "  Ver-."    He  >av^,  "  For  how  long  do  you  want  that 


I  said,  ".\bout  ^-ix  month~ 


He  >avs,  "Oh,  I  wouldn't 


loanr 

loan  it  to  you  for  six  months.  I  would  loan  it  to  you  for  two  years." 
He  said,  "1  am  going  away  to  Europe  and  you  will  be  ready  tn 
pav  it  and  there  will  be  r-ubt)dy  to  receive  it,  and  I  want  to  re- 
invest that  money.  I  want  to  make  it  for  two  years."  I  said  I 
would  not  take  it.  He  said,  "Let  us  make  it  for  one  year."  I 
said,  "Wc  will  agree  for  one  year."  He  said,  "Sentl  for  your 
lawyer."  I  said.  "I  don't  want  to  send  for  my  lawyer.''  I 
said,  "I  can  fix  that  thing  myself."  He  said,  "1  would  not  do 
it."'  So  I  telegraphed  for  my  attorney,  and  he  came  over  the  fol- 
lowing day  to  Xew  '\'ork,  and  [  told  Mr.  Kissel  I  would  stay  o\er 
the  night  in  Xew  York.  The  following  morning  Mr.  Kissel  came 
o\er,  and  he  said,  "I  thought  of  one  thing  here.  That  rel'inery 
is  a  new  refinery.  It  is  in  excellent  condition.  As  long  as  that 
refinery  stands  in  that  condition  the  security  is  gocid,  but  if  ynu 
should  start  that  refinery  and  run  it.  and  the  Sugar  Trust  should 
light  you,  you  will  lose  nn)ney  an  those  bonds  and  the  stock  will 
not  be  the  same  value  as  it  is  to-day.  I  want  you  to  sign  that 
during  the  period  of  that  loan  you  should  not  run  that  reimory." 
I  said,  "  I  will  do  it."     Mr.  Kissel  had  hi>  olTice  in  the  Mutual  Life 

'  Thua  in  original.  -  Kd. 


Trust  MKiiions 


381 


F.iiililing  in  Ww  York,  and  !ir  h.id  hi-  -afc  down  there.  He  said 
;<)  my  lawyer,  "  Xu;  let  us  ^o  om  r  to  my  lawyer" — to  Mr.  Kissel's 
'awyer  —and  they  will  i\\  it  up. 

Mr.  (i  \KRi,ri.  Who  wa>  \our  hr.wer"-' 

.Mr.  Skc.ai..  1  want  to  .say  to  you  I  will  he  very  f^lad  to  j^ivc  the 
name,  hut  please  do  not  send  for  the  man.    'I'he  man  is  dyin^  now. 
.Mr.  (rVKki.iT.    Who  wa-  .Mr.  Ki>>ers  lawyer? 
.Mr.  .Si.c,  \i,.   .My  lawyer  was  Mr.  Thoma's  B.  Harned. 
.Mr.  (i\KKKii.  He  was  your  lawyer? 
Mr,  Si.GAL.   \',s, 

Mr.  G.AKRi.Tr.  Who  wa^  .Mr.  Kissel'*,  lawyer? 
.Mr.  .Sf.g.m,,  Kissell's  lawyer?     Mr.  Kissel  had  no  lawyer.     He 

went  to 

-Mr.  G.'vRRKTT  (intcrpoMHtr).  Wa>  it  .Mr.  John  K.  Parsons? 
.Mr.    Si.cAi,.  That    is   the   .gentleman   he   went    to.      Mr.    Kissel 
>ays,  •'Xo;  let  us  <jo  to  my  lawyer,''  and  I  took  my  coat  and  >tartcd 
to  <To  with  him,  and  Mr.  Kissel  -aid  to  i.ie,  ■■  \<'iu  >iay  rii^dil  here 
and  we  will  ^'o  over."      They  w  nt  away  and  llu\-  came  hack  in 
ahout  15  minutes,  and  Mr.  Harned  said',  '-.Mr.  Se^ai,  .Mr.  Kissel 
took  me  to  Mr.  Parsons,  and   .Mr.  I'ar>ons  is  doinc;  a  «reat  deal 
of  work  for  the  Su^'ar  'I'rust,  and  I  want  you  to  know  it."  I  said, 
"What   does   that    mean?"      He   says,    "Mr.    Parsons   re[)re.-en;.- 
d.r/ens  of  corporations,     I  want  to  -ay  to  you  the  securities  I  will 
■^et  from  you  will  he  i:i  my  safe  and  in  my  huildinc;  until  you  take 
them  out."  I  said,  '•.Ml  ri<jht." 
Mr.  Garrp.tt.  That  was  Kissel  talking? 
Mr.  Segal.  That  was  .Mr.  Kissel,    We  made  a  contract. 
Mr.  Garrftt.  Will  you  state  what  that  contract  was? 
.Mr.  Edmcnds.  Have  you  the  contract.  .Mr.  Garrett,    You  might 
s'.ilmiit  that  to  him  and  ask  whether  or  not  that  is  the  contract. 
.Mr.  GARRr.TT,  Will  you  examine  thi>  contract.  Mr.  Segal,  E.x- 
hihit  L  to  the  hill  tiled  hy  the  Government  in  the  southern  district 
itf  Xew  York  against  the  .Vmerican  Sugar  Ret'ming  Go.  .md  others, 
and  state  wlu'ther  that  is  the  contract   which   vou  entered  into 
withMr,  Ki^^el? 
Mr,  Sf.gal  (after  examining  the  document).    That  is  the  contract. 
Mr.  Garrftt.  Mr.  ("hairman,  I  wish  to  have  the  stenographer 
incorporate  this  contract,  Kxhihit  L,  in  the  record  at  this  point. 
The  Chaikmw.  Mr.  Stenographer,  you  will  copy  that  contract 
in  the  record  at  this  point. 
The  Committee  will  take  a  recess  at  thi:,  time  until  half  pa^t 


i'i 


3X- 


IxursTRiAL  Combinations  and  Trusts 


2  o'clock  this  afternoon,  at  wliich  time,  Mr.  Segal,  we  will  resume 
your  examination. 


TESTIMONY   OF   ADOLPH   SK CAL— CoRlinUcci 

Mr.  Garrett.  Mr.  St-al.  just  previous  to  ihr  ;,,!i,>urnment  for 
luncheon  you  had  iiieiitilial  Jvxhiljit  L  to  a  i>Laition  iiled  by  the 
United  States  of  America  j^aiiist  the  American  Su<:ar  Retinin<' 
Co.  an<l  (Uhers  in  the  Circuit  Court  of  the  United  .States  for  the 
Southern  District  of  New  York  as  an  a^'reement  or  contract  be- 
tween Mr.  Ki-sel  and  your-elf,  touching  the  matter  of  a  loan 
about  which  you  had  ^reviou^ly  testilied.  I  want  to  ask  you  when 
you  tir>t  learned  that  the  money  loaned  vou  under  that  agreement 
Came  from  the  American  Sugar  Refininj?  Company. 

Mr.  Segal.  Tobably  six  weeks  or  two  m(»nlhs  afterwards  I 
dined  with  Mr.  Ki>sc,,  and  he  joked,  and  he  mentioned  many  times 
Mr.  Havemeyer.  I  says,  "Mr.  Kissel,  1  think  that  monev  comes 
from  the  Sugar  Trust."  Hesays, '-What  is  the  dilTerence?  Suppose 
It  does  come  from  then?"  ;L  was  probably  six  weeks  or  two 
months  after  the  loan  was  made. 

Mr.  Garrett.  Six  weeks  or  two  months  after  the  transaction? 

Mr.  Segal.  Yes. 

Mr.  Garrett.  Well.  I  understood  you  to  sav  that  when  vnu 
learned,  while  these  negotiations  were  pending  there  in  \.w 
lork 

Mr.  EaMUNDS.  Xo:  excuse  me;  negotiations  ucre  not  pendinc 
Ihcy  had  been  consunmiated.  Thev  were  in  N'ew  ^•ork  for  the 
purpose  of  signing  the  papers. 

Mr.  GARREir.  Ju>t  about  the  time  vou  signed  the  papers  vnu 
learned  t.iat  Mr.  John  K.  Parsons  was  connected  with  the  matter? 

Mr.  Segal.  01-..  n,,. 

Mr.  Garrett.  When  did  jou  tir>t  learn  that? 
Mr.  Segal.  I  understood  that  .Mr.  Parsons  was  Mr    Kissel's 
lawyer. 

Mr.  Garrett.  Wlien  did  vou  tirst  learn  that? 
Mr.  Segal.  When  we  talked  of  the  deal. 

Mr.   Garrett.  About   the  time  you   began   the  negotiation?? 
Mr.  Segal.   \  es;  and  it  suddenly  came  over  me. 
Mr.  Garrett.  .And  you  made  some  inquiry? 
Mr.  Segal.  Xo;  1  .said  to  Mr.  Kis.sel,  "Is  not  Mr.  Parsons  the 
ougar  Trusts  lawyer?       .Mr.  kissel  said,  "Why,  he  represent. 


Trust  Methods 


383 


:lozcns  of  other  parties;  an<l  the  best  proof  of  it  is  that  the  securities 
;-i  be  with  me.  ' 

Mr.  (iARRKTT.  I  assume  that  when  Mr.  Parson's'  name  was 
mentioned,  and  you  learned  that  he  was  Mr.  Kis-el's  lawyer  it 
immediately  aroused  your  suspicion  that  it  might  be  this  monev 
cmielrom  the  Su^ar  Trust?  -^ 

.Mr.  Si;(-..\i..  \"es. 

Mr.  Garkktt.  And  did  the  statement  of  Mr.  Kissel,  which  vcni 
l;a\c  mentuMied,  disarm  vour  sus[)icions  in  that  re"ard"^ 
.Mr.  Skgai..     Vo.  ^ 

Mr.  Garr]:tt.  .And  you  made  no  further  inquiry  in  that  respect^ 
^  Mr.  bEGAL.  \es;  I  had  a  transaction  with  Mr'  Kissel  before  of 

b-^so.ooo. 

Mr.  Garrktt.  Did  you  suppo^■e  that  he  was  loaning  his  own 
money,  or  that  he  was  agent  for  some  one  else? 

Mr  Sr.G.u..  I  thought  he  was  able.  His  wife  is  a  Vanderbilt. 
u'ld  1  thought  they  were  able  to  do  it. 

Mr.  Garri-.tt.  \'ou  got  the  money,  then? 

.^Ir.  Si:(;al.  Yes;  1  got  the  money  in  installments. 

Mr.  Ld.mlnds.  Vou  will  nt)tice  from  the  agreement  that  S-'oo  000 
o  the  Si,2s0.oco  was  to  be  retained  for  the  purpose  of  comi)leting 
the  Majestic  .\partmenl  Hou>e,  which  .Mr.  Segal  was  then  in  the 
course  oi  building  and  which  was  nearing  comj.letion. 
^  -Mr.  Garrmt.  It  wa>  to  be  paid  out  of  that.  I  understand  Mr 
.  cgal  says  so.  \()u  got  the  money  in  accordance  with  this  acrce- 
ment?  "    ^ 

Mr.  Skoal.  Yes. 

•Mr.  Garri-.tt.  What  commission  did  you  pnv  Mr.  Kissel? 

•^Ir.  Skg.ai..  Si 00,000. 

•Mr.  Garrkti.  Sioo.ooc  commi.ssion? 

•Mr.  Si;(;ai..   ^■e^. 

Mr.  Garrktt  Do  you  know  whether  he  got  any  other  curarais- 
sioiis  than   that? 

Mr.  Skgai,.  I  do  not  know. 

Mr.  G.vrrktt.  You  do  not  know  how  ihat  was? 

Mr.   Segal.  No,    sir. 

Mr.  Garrett.  That  was  all  you  i)aid  him? 

^^^.  .  .  -.AL.  Yes. 

Mr.  Garrett.  Now,  take  up  the  thread  of  the  story  from  that 
point  on.  will  you.  and  in  your  own  way  relate  it  to  the  committee? 
'  Thus  in  original— Kd. 


Ki 


I  ! 


384 


Industrial  Combinations   \ni)    Trtsts 


Mr,  Segal.  Aftir  thai  I  had  -onu'  otlur  iran.^actions  with 
Mr.  Ki>sd. 

Mr.    Gakki.11.    TdiKliiiif:;    the   >ainL'   inaltcr.-' 

.Mr,    Si  r, Ai..   .\ii. 

Mr.  EuMLNDS.  i  ^uppn^ic  you  want  thu  witness  Lo  conlinc  his 
statement  to  matters  that  relate  to  the  su<;ar  refinery,  do  you  not? 

Mr.  (i.XKKi.rr.  Ves;  directly  or  indirectly.  Perhaps  tho^e  trans- 
actions with    Mr.   Kissel   may  become  important.     We  will   see. 

Mr.  Skc.,vi,.  Then  I  paid  the  interest,  after  ()0  days.  1  paid  the 
interest  f[uarterly,  every  three  months. 

Mr.  (iARKiCTT.  Vou  paid  the  interest  c^uarterly? 

Mr.  SK(i.\L.  Ves. 

Mr.  Garrktt.  Let  me  ^et  that.  Did  you.  at  the  time  you  clo.^ed 
the  contract,  pay  interest  for  three  i   .)nths? 

Mr.  Si:(i,\L.  When  I  wanted  to  se  some  bonds,  I  could  not,  I 
could  not  sell  any  more,  for  the  reason  that  the  matter  came  up  an;! 
then  they  asked  when  I  was  going  to  start  the  rciiiu  ry,  and  then  1 
had  to  tell  them  about  that  contract,  and  noiiod\  uoirkl  want  to 
buv  bonds  when  the  plant  was  in  such  condition  that  it  c  mid  rot  he 
started  up. 

Mr.  CJAKKii  1,   Will  11  was  it  that  you  undertook  to  .sell  the  bond.-? 

Mr.  Skcai..  Ri.L^ht  away  after  that.  I  had  some  other  bonds- 
Si, 500,000  of  bonds  of  that  institution. 


ly  after  you  borrowed  this  money 
bonds? 
the  bonds? 
of  the  bonds. 


Do  vou  nniember  about  how 


Mr.  Garkioti.  Was  it  short  I 
that  you  undertook  to  sell  the 

Mr.  Skoal.  The  balance  oi 

Mr.  G,\KRi:n.  The  balance 

Mr.  Sec.al.  Yes. 

Mr.  Garrett.  How  loi.i,'  after? 
long   it   was? 

Mr.   Si.(.\L.   i'robal)ly   a   few    months. 

Mr.  G.VKRi. tr.  .\  few  months.  Now,  going  back  for  a  moment; 
at  the  time  you  borrowed  the  money  you  paid  interest  in  advance 
for  three  months,  did  you? 

Mr.  Skc.al.  1  ilo  not  think  so;  no. 

Mr.  Kn.MUNDS.  The  agreement  did  not  call  for  it. 

Mr.  Garrett.  .\t  the  end  of  the  first  (juarter  you  did  pay 
interest? 

Mr.  Segal.  Ves. 

Mr.  Garrett.  Was  that  for  the  past  (juartcr? 

Mr.  Segal.  Yes;  for  the  past  quarter. 


Trust  Methods 


3«: 


Mr.  Garrett.  V„u  [)ai>i  tlu  interest  quarterlv' 
Mr.  Skgal.  Yes,    -ir. 

•Mr.  Garrett.  When  ,li.i  you  pay  the  ccmmi.^sion? 
\  r.  hEGAL.  The     -mmission  was  taken  out. 
Mr.  Garrett.  Was  taken  out  of  the  ioan? 
Mr.  Segal.   It  wa..  taken  ri«ht  out  at  once  from  the  money. 
A  r.  Garrett.  All  n^ht.     Now,  -^o  ahead.  ^ 

Mr  SEcaL.  Then  I  irie.l  to  repay  that  loan,  and  1  went  to  Mr 
Kissel,  and  i  wanted  to  know  ii  Mr.  Kis>el  would  not  divide  that 

bonds?  *^'^^^'"'  ^^^'  ^'''''  ""^  ^^'^'  ^''"''  ^'""^  ''■''"^'■*'  ^'^  '^'"  ^he 

Mr.  Segal,  ^■cs. 

Mr.  Garri.tt.  Well,  ^^o  on. 

Mr.  Segal.  I  wanted  that  he  should  divide  the  su^ar  securities 
.rnn  the  other  .securities,  and  he  could  not  do  it.     He  said  that  it 

.'-i  n.,t  be  done.    I  made  him  different  propositions,  .md  it  was 

.';7  '""^•'/••■-  nu'  to  plank  over  81,250,000  at  one  clip,  an.i  1  thought 

1  he  would  d.v.de  that  m  half  it  would  be  easier  for  me  to  pay  if 

but  the  reply  was  that  that  could  n.,t  be  done.  '      ' 

Mr.  Garrett.  That  that  woul.i  not  be  done? 

Mr.  Segal.  Could   not    i)e  done. 

-Mr.  Garri:tt.  Could  not   ije  done? 

Mr.  Segal.  \'es. 

•Mr.  Garrett.  Why  could  it  not  l...  done---     Di,!  he  sav? 
.Mr.  Segal.  No.  '  ^ 

Mr.  Garrett.  Was  this  sub.e<,uent  to  the  time  that  vou  had 
l^arnnl  that  this  money  cane  from  the  .American  Sugar  Ketining 

Mr.  Segal.    lint  was  afterwards;  yes. 

Mr    Garrett    It  was  after  you  hid  learne.l  that  the  money 
-lie  irotn  the  American  Sui^ar  Ut  lining  Co  ? 
Mr.  Segal.  Yes. 
•Mr.  Gakkltt.   Wh.it  did  you  do  next? 

Mr   Segal    Well,  1  trie,! 'ditTerent  ways  to  g.t  those  securities 
out  and  I  could  not. 

Mr   Garkett    .\iter  he  told  you  that  he  could  not  divide  the 
anties  were  there  any  further  negotiations  with  him-any  other 
"tiers  made  to  him?  ^ 

"xl""'  fj'^''^^'  ^^'  '  '"'"'*'  '^'"^  different  jiropositions. 
•Mr.  Garrett.  Well,  what  were  those  propositions? 


386 


iNin'SFRIAI.    CdMlUN  \TIi»\S    AX!)    TlU'STS 


ay? 


Mr.  Segal.  1  olTered  to  jxiy  him  Sioo.ooo  as  a  i)rcniiuiri  if  he 
would  lot  me  run  the  refmery. 

.Mr.  (jARRETT.  If  he  would  let  you  run  it? 

Mr.  Sic.AL.  Yes. 

Mr.  Garrett,  .\bout  what  time  was  tliat  with  reference  to  the 
loan — about  how  many  months  after  you  had  borrcnved  the  money? 

Mr.  Si:(;\r..  Oh,  probably  four  or  five  months. 

Mr.  (i\Ki<i,ir.  .\nd  he  refuseil  that  olTer? 

Mr.  SrcM  .   He  refused  that  offer. 

Mr.  Garki  ir.  Well,  f,'o  ahead. 

Mr.  .Secai..  Well,  that  is  the  way  it  we.it  on  bntil  the  end  of  the 
year.  I  i)aiil,  three  times,  interest ;  three  times  I  made  the  payment 
of  intere.-^t;  and  the  ft)urth  cme,  I  olTered  the  money  providing;  he 
would  give  me  the  cou{)ons  back  from  the  bonds,  anil  he  did  nut 
uant  to  do  that. 

Mr.  Garki; ir.  Did  he  nfuse  to  do  it? 

Mr.  Segal.  He  d  to  give  me  the  coupons,  to  detach  the 

coupons  from  thos  1;. 

Mr.  Garrett.  \vhy?     Did  he 

.\Ir.  Se(.al.  He  said,  "  Because,  when  we  settle,  you  will  have  the 
coiiiions  with  them;  but  at  present  1  will  not  give  them  u[)." 

.Mr.  Garrett.  Go  ahead. 

.Mr.  Mdminds.  I  >uppose  you  understand  thit  he  refers  to  tlie 
Coupons  attaclied  to  the  I'ennsylv.mia  Sugar  Relining  Co.'s  bonds, 
and  not  to  the  others? 

Mr.   GakIvLii.   N'cs;   1  >o  understand.     Go  ahead,  Mr.  Segal. 

Mr.  Segal.  Well,  I  think  that  is  the  end  of  the  st()ry, 

M'-.  Garrett.  Wnat  occurred  then  with  your  business  matter.^ 
.ifter  he  had  refused  to  do  that?  What  sort  of  s'tuation  did  ym 
find  yourself  in.  as  a  result? 

Mr.  Segal.  I  found  myself  in  difficulties.  1  had  ditTerent  works 
going  on,  and  1  could  not  raise  money;  and  llmi  .Mr.  Hippie  com- 
mitted suicide,  und  that  was  the  end  of  the  wholi  thing. 

E.KHiniT  5 

GARY  DINNERS  ' 

Mr.  Gary.  Mr.  Chairman,  the  (|uestion,  as  it  seems  to  me,  opens 
up  a  consideration  of  what  has  been  referred  to  as  procceding>  at 

'  Testimony  uf  Jud^c  Illhcrt  H.  ("i.iry.  Hearings  before  the  Committee  im 
lnvf-iti(?.iti<)n  of  United  Stales  Steel  Corporation,  62nd  Conj?.,  2nd  scss.  1911- 
1012.  pp.  75   77.  -'02   --74.  270   j.Si. 


Trust  Mkiiioos 


387 


some  .>!  thr  <linnors.  as  wdl  a^  a  proposed  intrrn  ilional  iron  an,l 
>twl  itistitutL-;  ami  with  the  permission  of  the  ':.,nimittec  I  will  en- 
deavor to  state,  as  briedy  as  I  can,  exactly  what  is  involved  in  the 
uhole  subject  matter,  iiilendin-  to  .h,,w  what  wo  have  done  and 
what  our  intentions  ha\e  been  and  are. 


the 


Now  I  need  not  suRfjost  to  lawyers,  at  least  on  the  committee 
and  perhap.s  you  are  all  lawyers,  I  do  not  know  about  that,  that  the 
interi^rctation  ol  the  Sherman  Ait  has  been  more  or  less  involved 
in  doubt.    Eyideiitly  the  act  was  intended  to  prevent  the  existence 
and  exercise  of  nion()])olies  and  also  the  restraint  of  trade.    .\  coni- 
l>.iny  like  the  United  .States  Steel  Corporation,  with  ^^o  jier  cent  of 
the  domestic  steel  business  of  this  country,  was  confronted  with  two 
propositions.    It  had  no  rij^'ht  to  endeavor  to  prevent  redm  tion.s  in 
prices,  or,  in  other  words,  o)  maintain  the  etiuilibrium  of  business 
an.i  maintain  i)rices  substantially  level  or  at  least  free  from  sudden 
and  violent  fluctuations  by  means  of  anv  s,,ri  of  an  a^'reement  ex- 
press or  implied.    We  had  no  lawful  ri^ht,  as  I  understand,  to  make 
any  aKreement.  express  or  imj-lied,  directly  or  indirectly,  with  our 
competitors  in  business  to  maintain  prices.  notwitiist'andinL:  we 
were  recei vim,'  letters  daily  from  the  jobbers  all  over  the  comitry 
he^iiK  us,  i I  possible,  to  prevent  deniorali/ation  and  to  prexcnt 
decrease  in  jjrices  which  should  mark  down  their  inventories  and  in 
many  ca.ses  subject  them  to  the  risk  of  bankruptcy.    On  the  other 
hand,  considering  this  same  question  of  sustaining,  so  far  as  practi- 
c.ible,  the  e(|uilibrium  of  trade,  we  believed  we  had  no  moral  or 
ItL'al  right  to  become  involved  in  a  bittiT  .iiid  destnu  ti\e  competi- 
tion, such  as  u.st-d  to  fdll.iw  any  kin<l  of  depression  in  business  among 
the  iron  and  steel  maiuiiaciurers.  for  the  reason  that  if  we  should  go 
intoacomi)etition  of  that  kind  it  meant  a  w.irof  the  survival  of  the 
fittest;  it  meant  that  .1  large  percentage,  as  in  old  times,  of  the  peo- 
ple engaged  in  the  manufacture  of  steel  would  be  forced  into  bank- 
rui)tcy  for  many  reasons— their  facilities  for  manufacturi'  were  not 
so  good,  their  cost  of  production    ^as  high,  their  e(|uipment.  their 
organi/.ition,  their  decrea.sed  own-rshipof  some  of  the  raw  products 
;ind  other  things  of  that  kind  which  enter  into  the  co-t  of  [)roduction. 
Would  place  them  at  a  disadvantage,  and  therefore  it  was  believed. 
i)y  me  at  least,  that  it  was  not  for  the  best  interests  of  the  m.inuf.ic- 
turers  generally  or  for  their  customers  who  desired  stability  as  op- 
|>|'sed  to  demoralization  and  wide  tUictuations  or  for  the  employees 


38a 


l.NUl  .->1K1A1,    ("OMI'INAIIONS    AXl)    TrUSTS 


of  the  various  corporations  throu.i^hout  the  eountry  who  desired, 
so  far  as  possible,  steady  work — continuous  work  at  the  l)est  pricc>. 
and  a  wide,  sudden,  extreme  lowering:;  of  prices  necessarily  meant 
reihiction  in  the  waives.  R'-  Auctions  were  advocated  almost  at  the 
sta-t  «ji  the  panic  of  1007,  and  many  of  you  know  that  our  company 
took  a  leading'  i)art  in  opfuising  that  and  we  went  through  that 
panic  without  making;  any  reduction  in  wa^'es.  although  many,  ii" 
not  all,  of  our  competitors  before  the  year  was  terminated  did  ma- 
terially reduce  their  wage>. 

\ow,  the  question  was  how  to  get  between  the  two  extremes  of 
securing  a  monopoly  by  driving  out  competition,  hovve\er  good- 
naturedly,  in  a  bitter,  destructive  competition  or  without  making 
any  agreement,  express  or  implied,  tacit  or  otherwise,  which  should 
result  in  the  maintenance  of  prices,  and  so,  gentlemen,  I  invited  a 
large  percentage  of  the  steel  interests  of  the  country  to  meet  me  at 
dinner  and  then  presenied  these  views  to  them  and,  so  far  as  1  could. 
the  results  of  our  becoming  dcnn)ralized  and  extreme  decreases  in 
prices  like  those  which  obtained  under  the  old  regime.  Then,  1  said 
that  it  seemed  to  me  the  only  way  we  could  lawfully  prevent  such 
demnrali/.ation  and  maintain  a  reasonable  steadiness  in  businc'^s. 
whether  we  lowered  the  prices  from  time  to  time  or  not,  whelhir 
depending  upon  circumstances  we  were  willing  to  make  concession> 
or  reductions  after  the  jobbers  had  relieved  themselves  of  the  lariii 
lots,  so  as  to  prevent  demorali/.ation.  was  I'or  the  steel  people  t- 
come  together  occasionally  and  to  till  one  to  the  others  exactly 
what  his  business  was.  In  other  wurd>,  a  <lisclosure  by  each  one  t'' 
all  others  of  all  the  circumstance-  surrounding  his  particular  bu.-i 
ncss.  In  other  words,  to  -tate  it  simply,  if  three  men.  gentlemen  on 
this  committee,  were  practicing  law  in  a  certain  town  and  each  om 
knew  that  the  customary  fee  for  services  in  court  was  S50  a  day  and 
a  gentleman  from  another  part  of  the  country  should  locate  in  tlui! 
town  .md  make  .1  tot, illy  ditferent  price,  very  mui  h  lower,  he  would 
immediately  get  up  some  sort  of  com[)otition  amongst  these  pro- 
fessi(mal  men.  If  those  three  men,  however,  on  this  committee, 
were  in  daily  conference  and  each  one  knew  that  the  others  dirl  n,,t 
propose  to  change  the  fees,  probably  this  outsider  would  not  nuiki 
very  much  headway  in  creating  a  demoralization. 


Mr.  Bi:\!i.  Jud.^f.  I  .un  intere-tcd  in  the  statement  that  you 
made  .il)out  these  dinners.    Were  they  tailed  '"the  Gary  dinner's?" 


Trust  Methods 


3S9 


Mr.  (Jakv.  I  huive  >L-cn  M)nu'  of  iIk-  j)a[)tT>  (k'sii,niatf  l!u  in  in  that 
way. 

.Mr.  Hkall.  About  what  dati.-  did  you  bcjiin  to  have  these 
dinners? 

Mr.  Gary.  Durin.i^  the  panic  of  IQ07.  or  just  following'.  I  think 
during  it — before  the  panic  was  over.  May  I  incjuire  whether  you 
were  present  when  I  described  that  the  other  day  -the  first  dinner 
L'iven^when  the  steel  peoj-jlc 


Mr.  Bk.vll.  Since  iqoj  have  these  dinners  been  held  at  any  stated 
lUervals/  or  have  they  been  at  such  times  as  suited  your  conven- 
ience? 

Mr.  G.\RV.  They  have  been  given  at  such  times  as  suited  my  con- 
venience and  disposition,  and  public  announcement  has  been  made 
in  each  instance  and  what  took  place  at  the  dinners.  If  there  was 
any  question  of  Ijusiness  referred  to,  it  has  been  given  to  the  public 
press.  Latterly,  for  some  time — in  fact,  the  major  i)art-~there 
have  not  been  so  very  many  dinners  as  you  might  think:  but  at 
mo-t  of  the  dinners  what  I  >aid  was  taken  down  and  written  up  and 
printed,  and  I  have  promiNcd  the  committee,  at  their  recjuest,  to 
furnish  these  printed  speeches.  At  two  of  the  dinners  everything 
Unit  was  said  was  taken  down.    It  happeneil  m);  and,  as  it  was  taken 

printed  and  distributed  to  those  who 


up 


P 


we 


re  present — so  that  every  thing  that  was  said  there  was  taken 
down.  At  one  of  those  dinners  the  CjUestion  of  prices,  or  the  question 
i>f  markets,  or  what  ought  to  be  done  was  stated  fullv  and  freely 


bvallof  tl 


uni,  an 


d  all 


of  us  must  abide  bv  the  record  which 


we 


made.     Fhert-  is  no  concealment  about  it.     There  never  has  been. 


W, 


lurnish  those  to  tiie  committee. 


Mr.  Gary.  There  is  just  one  question  involved  in  those  dinners, 
it  seems  to  nic:  That  i>  whether  or  not  it  is  lawful,  and  is  good  law 
;ind  good  morals,  to  ende.ivor  by  intercour.se  such  as  you  see  de- 
st  rihed  in  those  proceedings  to  maintain  to  a  reasonable  extent  the 
equilibrium  of  business,  to  prevent  utter  demoralization  of  business 
and  destructive  competition. 

Mr.  Hi.Ai.L.  That  was  the  jiurpose  of  each  mic  of  those  dinners? 

Mr.  Gary.    Tliat  .nid   nothing  else. 


Thus  in  the  original.— Ed. 


390 


IxurSTKIAI.    C'oMiil.WTIOXS    AND    TrTSTS 


The  Chairman-.  I  know;  Ijut  I  mean  to  advJM"  llie  Rcntlomcn  that 
this  commillcf  will  not  hjok  into  anything,'  niorc  than  hi>  official 
acts. 

Mr.  Gary.  Prices  were  not  attempted  to  l)e  ti.xefl,  were  not  tixed, 
couki  not  be  tixed,  and  there  was  no  possible  way  of  fixing  them  ur 
maintaining  them,  unless  you  have  some  way  of  having  them  fixed 
under  Government  control,  or  you  are  allowed  to  do  it  by  positive 
agreement-.  It  never  ha.^  been  possiljle.  It  never  could' be  possi- 
ble. We  have  never  succeeded  in  doing  so.  Hut  wc  have,  by  this 
friendly  intercourse,  prevented  demorali;^ation— sudden,  wild,  ex- 
treme lluctuations— destructive  cumpdilion  that  would  drive 
large  numbers  of  them  entirely  (^ut  of  business,  and  that  would  be 
ruinous  to  the  customers  of  the  -teel  [)eople  who  had  large  stocks  of 
goods  on  hand  from  time  to  time,  and  which  would  spread  to  other 
lines  of  industry.  We  have  made  no  secret  about  it,  and  the  i)ul)lii' 
has  knoivn  exactly  what  we  have  done;  and  if  the  Department  of 
Justice,  for  instance,  or  the  President,  or  Congress,  should  sav, 
"This  is  not  the  wise  thing  tt)  do  or  the  right  thing  to  do,"  you  mav 
be  certain  it  would  not  be  conti-iUed  for  one  moment. 

Mr.  Hkall.  As  1  understand  ii ,  you  wanted  to  avoid  destructixe 
competition  on  the  one  side,  and  you  wanted  to  axoid  th<'  peiils  and 
the  danger:,  of  the  Sherman  antitrust  law  on  the  other  side? 

.Mr.  G\KY.  Of  monoi)Iy  on  the  other  side? 

Mr.  Hkam.  Of  monopoly,  unlawful  restraint  of  trade;  and  ymi 
have  resorted  to  this  means  of  bringing  together  those  interested  in 
the  business  for  an  exchange  and  interchange  of  views  at  the-e 
dinners? 

Mr.  CJarv.  Xot  so  much  an  interchange  of  views  as  a  statement 
of  thi'  conditions  surrounding  each  one. 

Mr.  Heall.  I  will  ask  you  about  this  particular  dinner  of  Jan- 
uary II,  igi  1. 

Mr.    CiARV.  ()f   course   the   jiroceedings  s[ieak  for   themselve>. 

Mr.  Bkai.I-.  ^■es.  Was  not  tuc  purpose  of  that  dinner  to  arrive, 
directly  or  indirectly— jirobably  the  latter— at  an  understanding 
that  [irices  would  not  be  reduced  or  lowered? 

Mr.  (}\RY.   i-lmphatically,  no;  it  was  not. 

Mr.  Blall.  Let  mi'  call  your  attention  to  some  of  the  things  that 
Were  said. 

Mr.   Gakv.   P,y  nu? 

.Mr.  Ih.  All..   By  you  and  by  others  who  participated  in  the  dinner. 

-Mr.  ClARV.  X'erv  well. 


Trl'st  MniioDs 


391 


Mr.  Bi:  \i  i..  Anci  I  ux)u!(l  likf  to  have  your  intcrf)rclation  of  what 
it  means. 

.Mr.    (;\KV.   What   i-   I  lie   date? 

Mr.   Hi:.\i.i..  January    11,    iqii. 

Mr.  Gary.  Wry  well. 

.Mr.  Hi.Ai.i..  Look  fin-t  at  pa^c  (>.  about  the  middle  of  the  page. 
1  rtad  as  follows: 

.\l  this  parliiular  lime  there  is  not  in  this  country  a  demand  for  more  than 
-.1  per  ecnt  of  the  total  |)roduiinK  capacity  in  our  lines.  It  i>  obvious  from  this 
slutcment  of  fact  that  there  is  not  cnout;h  Inisiness  to  K"  around  and  that  there 
b  no  ptxssible  way  of  proteclim,'  one  another  and  thereby  protecting'  oneself 
e.vcept  to  .submit  ourselves  to  the  conditions  as  thev  exi.st"and  to  take  and  he 
satislied  with  our  fair  proportion  of  the  business  which  is  olTered.    [.\pplause.] 

What   did  that    mean,  Jud;,^'  Gary? 

Mr.  G.\RV.  It  meant  to  say  that  any  fair-minded  man,  knowing 
there  was  only  50  per  cent  business  as  eompared  with  the  ea|)acity, 
would  believe  it  to  be  for  his  own  interest  to  be  satisfied  with  his 
mills  running  at  one-half  their  total  (■ai)acity,  as  otherwise  he  would 
be  necessarily  involved  in  a  competition  that  meant  the  survival  of 
the  fittest,  every  one  struggling  to  get  more  than  50  per  cent  ul 
capacity,  and  bringing  about  demoralization  and  ruin. 

.Mr.  iJi: Ai.L.  At  that  time  were  the  mills  that  these  dilTereiit  gen- 
tlemen represented  who  were  at  the  bantjuet,  running  onh'  so'^per 
Cent  of  their  capacity? 

. 'r.  (;\KV.  No;  on  the  contrary  some  were  running,  as  usual, 
,il)out  40  per  cent,  and  some  were  running  about  60  per  cent;  anci 
it  has  been  that  way  all  the  time,  more  or  less.  There  is  no  pos-ihle 
way  of  controlling.  Of  course,  that  is  my  advice.  I  wish  everyone 
would  recognize  the  fact  that  that  is  what  he  ought  to  do,  but  he  is 
not  willing  to  do  tliat.  lie  is  under  no  obligation  to  do  that.  And 
you  will  see,  as  1  go  (in,  that  I  state  clearly  un.ler  no  circumstances 
would  I  bind  my.self  to  do  or  not  to  do'anvthing;  that  everyone 
must  be  1<  ''t  free  to  do  as  he  pleases.  That'l  understand  to  ha\-j 
been  the  position  of  the  Attorney  General  in  his  argument  before 
the  Smreme  Court  of  the  United  States,  that  the  law  does  not  com- 
pel people  to  compete.  If  everyone  leaves  himself  free  to  compete, 
then  he  is  living  up  to  the  requirements  of  the  law.  At  the  same 
time,  I  would  not  hesitate  to  advise  my  as.sociates  to  be  satisfied 
with  their  fair  share  of  business.  That  advice  has  been  followed  to 
some  extent.  Hut,  as  no  one  was  bound  in  any  way,  never  had  to 
(Jo  it,  they  did  not  live  uj)  to  the  [irinciple.    That  is  the  trouble. 


'W 


^$1 


jy- 


LnUI'STRIAI.    CoMBINATIOXS    AM)     i 


Ri;STS 


Mr.  Beall.  All  through  the  proceeding's  of  that  dinner,  Jud^e 
does  not  the  thought  run  that  all  those  who  are  present  are  in  hon'or 
bound  to  accept  anfl  to  abide  by  that  [)riee? 

Mr.  Gary.  I  do  not  think  you  can  connect  the  two  stale 


Mr.  Bk  vi.i..  ()i 


ments. 

)U 


refer  to  page 


^    ,       ,  <>"  -^I^.v  4.  ujiu  at  the  Waldorf,  in  Xew  York,  y. 

had  a  bancjuet.-' 

Mr.  LiNDAnrRv.   Is  that  in  this  same  book? 

Mr.  Bicai.i,.  Xo;  it  is  in  a  different  ijook.     1 

]Mr.    Li.\i)Am-RY.  That   is   the   last    meeting? 

Mr.   Beau..  It    is   May  4. 

Mr.    LiNDAmRv.  Of    what    year? 

Mr.  Beai.i,.  i()ii. 

Mr.  Gary.  .\nd  what  i)ac;e  do  vou  read  from' 

Mr.  Beam.  Pa^.  j;.     i  read  as  follows: 

\'ou  know  I  do  not  say  thai  for  the  purpo^^e  of  (lecclving  vou  at  all  nor  for.mv 
purpose  e.xtcpt  to  let  you  know  exactly  what  I  am  iloinR.  "  .^nd,  therefore  -i-'] 
havL^said  before,  Konllemen,  vvc  come  tOKcther  upon  a  platform  that  in\ol\u. 
the  honor  01  a  man,  which  is  far  better  and  far  i  i^her  an.l  far  more  binding 
upon  us  than  any  contract  whic  h  we  loukl  make. 

Mr.  Gary.  Yes.  Xow,  I  would  think,  if  I  should  meet  vou  a 
competitor  of  mine,  on  the  street,  and  ask  you  what  prices  you  are 
charging  and  to  what  extent  you  are  running  vour  mills,  and  I 
should  tell  you  what  I  was  doing,  both  of  us  being  perfectly  frank 
and  neighborly,  and  then  I  should  leave  you  and  go  to  one  of  jour 
customers  and  offer  to  sell  him  good>  at  a  less  price  than  you  told  me 
you  were  selling  at,  that  would  be  most  dishonorable  conduct  on 
my  part,  and  that  I  would  haw  a  reason  to  e.xpect,  us  honorable 
men,  you  and  1  having  told  one  another  what  we  were  doing,  that 
we  would  not  go  and  do  something  to  the  contrary  of  thatTo  the 
prejudice  of  either  one.  without  telling  him  so  frankly.  That  is 
what  1  meant  and  that  is  what  I  have  explained  from  time  to  time. 
Mr.  Bb:ali..  Then  I  quote  further  from  this  speech  of  January  11, 
iQii,  on  page  7: 

I  say  in  this  presence  to  men  who  know  by  long  experience— men  who  know  to 
a  demonstration  that  what  I  speak  is  true  and  !<  Africa  I -that  we  have  something 
Detter  to  ^uide  and  control  us  in  our  business  methorls  than  a  contract  which 
depends  uj)on  written  or  verbal  promises  with  a  penalty  attaihed. 

Xow.  ii  you  made  that  -urt  of  a  contract,  you  would  violate  the 
Sherman  antitrust  law,  would   vou  not? 

Mr.    Gary.   Yes.   we   wmild;   but    we   have   somethin"   better. 


Tkust  Methods 


393 


Mr.  Beall.  You  have  something  that  is  better  even  than  a  prom- 
ise in  writing',  witli  a  i)enalty  attached:-' 

Mr.  Gary.  I  do  not  say  that  it  is  more  binding  than  a  contract. 
That  is  quite  a  dilTerent   thing. 

Mr.  Bf.ali,.  S>,niethiiig  Ijetter  to  guide  you.     You  say— 

\\\-  luivc  M)mciliiim  hcUcr  lu  guide  and  contn.l  us  in  our  business  methods 
tlun  a  eonlmct — 

•Mr.  LiNnAiURV.  Now,  ui||  you  let  Judge  Gary  tell  what  that  is? 
-Mr.  liKAi.i.  (continuing): 

'I'han  a  eontnut  \vhi(  h  drpends  upon  written  or  verba!  promises  uiih  a 
[X'naky  attached.  We  as  men.  as  sentlemen.  as  friends,  as  neishhors  having 
been  m  elosc  eommunieation  and  contact  during  the  last  few  years,  have  reached 
a  iKjmt  where  we  entertain  for  one  another  resj)ect  and  alTect'ionate  regard  We 
h:ive  reached  a  position  so  high  in  our  lines  of  aclivitv  that  we  are'bound  to 
-il'-ct  one  another. 


/-    fi 


iudt 


ge,  in  all  these  dinners,  in  all  these  speeche.s  made  at  this  I 


)an- 


i^uet  on  January  ii,  i^i  i.  does  not  the  thought  run  throu-'h  then 


that  without  enterin 


nia 


king  any  a<rreement  tl 


g  into  any  written  oljjigation  or  contract,  or 


lat  would  [)ut  the  hand  of  the  Sherman  1 


on  you,  you  were  in  honor  bound  to  observe- 


aw 


Mr.   G\k\.    T 


vhat; 


Mr.    Hi;all.  To   coojierate? 
Mr.  (;arv.  Well. 

Mr.  JiKAt.L.  In  such  a  way  as  to  protect  each  other  against  any 
c(kiction   in   prices? 
Mr.  CJarv.   Xot  at  ; 


It 


does  not  mean  that  at  all;  not  at  all; 


\\\>u 


cause  we  had  no  lixe(l  prices.    We  have  never  said  that  our  prices 


Id  be  a  certain  thinu;.  and  thcv  h 


fluctuated  all  t!u'  t 


nne. 


ave  not.     Our  i)rices  have 
There  has  ne\er  been  the  time  that  our 


)rices  remained  the  same,  or  ha\-e  been  all  alike;  never,  not  for  a 


single  day,  so  far  as  I  knt 


iw 


We  h; 


e  atteniiited  in  this  way  -T 


n.ive  attempted,  1  will  say,  and  others  ha\e  attempted  by  this  in- 
fluence—to  jirevent  thi.s  utter  demoralization  which  results  from  a 
disiKisition  on  the  part  of  everyone  to  go  and  get  all  the  business  he 
can.  and  at  any  price  he  can,  regardless  of  whether  it  is  fair  and 
reasonable,  whether  it  is  Ix'low  co.->t  or  not,  whether  it  would  destrov 


liis  neighbor  and  drive  hirn  out  of  busine- 


another  know  what  we  are  d 


uin<ir  w 


ith 


a  disposition  to  let  one 


everyone  to  keep  the  price  up  to  what  he  thout;ht  ouirht  to  be  re 


«<>nabi 


le  and  fair,     1  -  it  au'ai 


a  view  oi  tr\'in<;  to  per.suade 


i- 
om- 


any  l.iw  tor  me  to  go  to  \-ou,  a  i. 


MH 


Industrial  Combinations  and  Trust: 


I)i'titor  in  business,  and  say  to  you,  '•Your  {)riic>,  I  think,  ouj^hl  t  > 
bf  higher  than  they  are,"  or  "ou'jht  to  be  lower  than  they  are'  . 
Il  you  leave  your-elf  free  to  make  ttiem  as  you  please,  or  if  I  do,  we 
do  not  violate  the  law.  I  have  a  right  to  tel!  y<^u.  We  have  never 
sa''d.  never  intimated,  that  the  prices  should  he  so  and  so,  and  each 
one  of  us  shoukl  keep  these  prices;  ne\er  directly  or  indirectly. 

.Mr.  liKAi.L.  Have  you  not  impresst'd  on  them  time  after  tin'ie 
that  it  would  be  the  grossest  breach  of  honor  for  them  to  cut  their 
prices  below  a  competitor? 

Mr.  G.\RY.  .\'o,  I  ha\e  not;  never  a  word.  You  will  never  find 
such  a  suggestion  as  that. 

Mr.  Bkali..   I  read  from  ])age  7,  again: 

\V(.'  have  readied  ;i  (lositicin  so  liiijh  in  our  line.-,  of  activity  that  we  arc  bound 
to  protect  one  another,  and  whi'ii  a  man  reaches  a  jio.Mtion  where  his  honor  is  at 
stake,  where  even  more  than  life  itself  is  ( oiuxTned.  where  he  can  not  act  or  fail 
to  act  except  with  a  distinct  and  clear  un<lerslandin-  thai  his  honor  is  involved, 
then  he  has  reached  a  [wsition  that  is  more  binding  on  him  than  any  written  or 
\erbal  contract.    [Ap[)lause.] 

Why  were  you  seeking  so  strenuously  to  impress  upon  them  that 
their  honor  was  involved  in  some  kind  of  way? 

Mr.  G.\RY.  So  that  we,  ccMiiing  together,  tli-clos'ng  our  business, 
telling  one  another  about  to  what  extent  we  are  running  our  mills, 
about  how  our  business  was  going  generally,  what  our  lustomer' 
were,  what  our  dilTiculties  were,  having  mad'-'  those  full  di-closures, 
so  Iha^  '  .  .Tyone  \.',iiUl  reach  the  decisior.  xissible,  that  he  ought 
not  to  do  a  mean  thing  in  the  trade,  in  competition;  in  other  word-, 
so  that  C()m[)etition  should  be  honorable,  decent,  and  reasonable,  as 
opposed  to  bitter,  hostile,  destructive  competition  such  as  used  to 
exist. 

Mr.  Bkall.  Did  you  not  think  that  the  meanest  thing  that  any 
of  them  could  do  would  be  to  reduce  jiriccs? 

Mr.  Gary.  I  should  think.  .Mr.  Heall,  m"  yoti  had  a  client  and  I 
had  a  client,  consulting  you  and  me  both  iH-ofessioiially,  going  to 
you  and  asking  you  what  you  would  charge  him,  and  you  roldliim 
Sioo,  and  then  vou  should  come  to  me  and  say,  "That  gentleman. 
my  old  client,  has  been  in  my  ofTice  and  asked  me  how  much  I 
would  charge  him,  and  I  told  him  Sioo"— I  having  gotten  that  in- 
formation from  you.  1  should  think  if  I  should  say  to  him  when  he 
came  to  my  ofBcc.  he  bv'lieviiig  I  was  as  competent  as  you,  that  I 
W(_)uld  do  it  for  .^(jc,  that  would  be  dishonorable;  ihat  is  what  I 
think  about  it,  mo,-t  certainly,  unless  I  went  to  you  and  said:  "Now, 


Trls;  Mktiiods 


you  told  mo  you  said  you  would  do  I 

it  for  less  than  that,  and  I  will  char''L-  hi 


li.^  ior  Sioo,  and  I  want  to  do 


Mr.  Linda uuRv.  I 


m  on 


\y  $yo. 


\va- 


simj)ly 


want  to  call  attention  to  the  fact  that  tl 


us 


i  strenuous  fndca\\)r  to  establish  the  golden  rule,  and 


that  it  ()ui,'ht  to  be  encoura;;ed. 
Mr.  Bi:.\Li..   The  steel  rule. 
Mr.  LiND.ABURY.  Xo,  the  golden  rul< 


Mr.  Bi:  u.L.    A  resort 


pa.i 


;e  o: 


to  moral  suasion.     T  quote  again  from 


Why  do  I  mention  these  ihinLjs?    [■ 


■'[«:iketh.    These  ihou^hls  in  ni 


rom  the  abuniianrc  of  the  heart  thi 


mouth 


frankness. 


VVh 


V   IS   II.- 


ly  ninul,  in  my  h^art,  Urec  expression.     1  ileal 


Why  are  the.sc-  th 


ruwd  into  wonis:^     Heiause  at  this  parlieular  lime  I  a 


lits  in  ni)   mind?    Wii 


\-  do 


th 


ey 


around  this  t 


,  no  one  connected  with  this  Ij 


m  an.xioiis  that  no  man 
iisiness  shall,  for  a  single  moment, 


f..rL'i  t  the  liij,'h  moral  obli^'ation  he  is  under  toward  his  ne'iK'hbor 
-Mr.  LiXD.XBURV.  That  is  rijjht. 


Mr.   Hi:.\LL   icont 


uiuuu 


read 


Ims:): 


ISeeause  if  it  was  the  ia.>t  word  I  would  have  the  privilcRc  of  savinR  to  vou   I 


■ould  say,  with  all  mv  miirht  and 


to  e.\i)rcss,  I 
e\erv  one  of  us  : 


with  all  th 


ider  it  of  the  highest  import 


emjihasis  that  I  could  find  word.s 


at  thi 


« 


hich  he  has 


ave  a  keen  and  abiding'  sense  of  the  per.sc 


[)articular  time  that; 


toward  all  others  and  t 


inal  <jt)lij;ation 


trespassing  within  the  domain  of  the  n" 


i'mli(lenc( 


and  tl 


make  no  mistake  of  running  the  ri>k  of 
■  hts  of  his  neighhor.  who  has  given  his 


■ust,  and  who  is  willing  at  all  time>  to  put  within  the  kmnvledg 


.ind  therefore  more  or  less  under  the  charge  and 
direction  of  his  alTairs. 


control  of  others  the  very 


A -I 


■  .■  i . 


^  -Mr.  Bf.all.  Mr.  Farrcll  is,  I  believe,  president  of  the  United 
btatr>  Steel  Corporation  now? 

Mr.  Gary.    Yes,  he  is. 

Mr.  Bic ALL.  He  made  a  speech  that  night? 

Mr.  G.VRY.  I  believe  he  did. 

Mr.  Be.all.  Let   me  quote  from  that.     T  read  fr,)m  page  14: 

I  understand  the  policy  of  the  (or[)orati(m  to  be  to  cooperate  with  it--  com- 
petitors in  the  eilort  to  maintain  lair  ]jrices 

Mr.  Gary.  Well,  that  means 

Mr.   Beall   (continuing): 

jind  the  stability  of  business  conditions,  by  every  means  permissible  under  the 
laws  of  the'  country  and  not  antagonistic  to  the  public  conscience. 

That  gives  you  the  full  •    .  >tation. 

Mr.  Gary.  Yes.    That  ..    ms  in  the  way  I  have  -tated.  and  no 


?V  - 

III; 

30 


IXDLSTKIAI.    C'uMBINATIOXS   AND   TRUSTS 


other  way.  The  answrr  Id  your  in(|uiry  i>  found  in  the  fact  that 
prices  have  not  been  maintained.  \ou  v.  ill  lind  in  ^onH■  of  those 
speeches  i  statement  by  nie,  [lerhaps  repeatedly,  lliat  1  have  ne\Lr 
stood  for  unchanged  or  unchan«i;ealjle  prices;  thai  that  i>  n(Jl  my 
l)osition.  And  there  have  not  been  unchanj,'ed  price>.  They  have 
Ijeen  rrn.re  or  less  changed  all  the  time.  That  i>  not  the  point.  The 
point  is  to  try  and  [)revent  the  kind  of  bitter,  destructive,  unfair, 
and  unreasonable  competition  that  demorah'/ces  business,  and 
drives  to  destruction  many  ol  liie  operalui>,  of  I  he  manufacturer-, 
and  their  customers. 


Mr.  Bkali,.   Mr.  Willis  L.  King  sj^ke  also  at  this  last  banquet-' 
Mr.   (Iakv.  \fs. 

Mr.  BkalL.  Let  mc  quote  somethini,'  from  him.     Who  is  Mr 
King? 

Mr.  CxARv.  .Mr.  King  is  the  vice  president  and  general  manager 
of  the  Jones  &  Laughlin  Co.  of  J'itlsburg. 
Mr.    liKALL.  .\   steel   manufacturer? 
.Mr.   Gary.  Ves. 
.Mr.  Bi:all.  Quoting  from  page  21,  he  said. 

F  think,  therefore  tc  talk  of  reducrnR  the  prices  ou«ht  not  to  be-  considered 
lor  a  moment.  .\s  Ju<l«e  t.ary  ha,  very  properly  .siiid,  it  would  not  result  in 
j;ood  to  anyone-.  1  would  not  result  in  more  business  to  us.  it  would  not  do  the 
ml)h.  any  K<.,d;  therefore  I  h.,po  i.  will  |>e  ll-.e  con.sensus  of  opini.m  here  to-night 
hat  we  will  maintam  the  present  prices,  which  are  fair  and  reasonable,  and 
.nva>  v,th  patieme  the  inevitable  result,  which  will  of  course  be  better  bu.s  ne.s, 
and  I  think  in  the  very  near  future. 

^Ir.  r,  \RY.  Xo  doul.t  that  was  hi>  hope  and  hi>  wish  and  his 
advice  but  it  was  not  binding,  and  therefore  was  not  fully  accented 
nor  adopted.  ' 

.Mr.  B.;\ii..  Was  it  not  thcconscnsusof  ..pinh.n  tlurethat  niiiht 
Judge,  among  ,ill  those  who  spoke?  ' 

Mr.  G.\KV.  \ou  have  there  everything  ih.a  uas  said  bv  all  who 
spoke,  and  speeches  speak  for  themselves. 

Mr  Hf.ai  I..  I'robably  the  entire  .speeches  will  not  1„.  i,i  the 
record,  but  you  v\ere  there. 

NIr.   (Jary.  They  are,   Mr.   Heall;  every  word  th.it   was  said. 

Mr.    Hartlett.  Vou   mean   in   that   book? 

Mr.  Gary.  Ve-^.  I  m.an  in  this  pamphlet  of  [anuarv  11.  Kvery- 
thing  that  was  said  at  the  dinner,  without  exception,  by  every 


n:ii 


Trust  MmnoDs 


3Q7 


fpeakcr  is  there;  not. a  word  is  left  out.  and  these  gentlemen  had  no 
opiiortunily  to  revise  their  speeche-;  not  a  [)arlicle  changed;  not hinR 
added:   nothing   left  out. 

.Mr.  !{i:all.  Was  not  tlic  dominant  thought  running  through  all 
tlie-e  speeciies  of  these  gentlemen  who  were  there  that  it  siiouhl  l)e 
die  consensus  of  opinion  among  them  that  there  -hould  he  no  low- 
ering of  prices? 

Mr.  G.\m-.  The  speeches  speak  for  themsehos. 

Mr.  Bi:\i.i..  ^  ou  have  read  them.     What  is  your  oj)inion? 

.Mr.  Gary,  i  do  not  think  that  i^  a  fair,  ju>t  opinion  of  the 
>l)eeches. 

Mr.  FiiM.i..  That  i>  the  very  reason  I  wanted  you  to  express 
your  opininn,  becau.-^c  1  did  not  want  to  e.xpre'-N  mine,  because  it 
might  nui  Ije  fair. 


Mr.  Gary.  I  do  not  {Wmk  >o,  although  I  fed  certain  that  it  was 
the  wish  and  the  liope  of  everyone  that  jirices  would  not  l)e  reduced. 
N'ow,  it  would  be  very  strange  if  in  the  speeches  niadi-  by  the>e  gen- 
tlemen, with  no  opportunity  to  prepare,  and  with  that  hope  and 
wi-h  in  their  minds,  they  would  use  expressions  which  you  would 
think  meant  that  it  was  intended  to  maintain  [)rices.  Hut  you  will 
lint  find  in  any  of  the  meetings  any  agreement  of  the  kind."  I  have 
not  attempted  here  to  disguise  the  fact,  Mr.  lieail.  that  the  object  of 
the-c'  meetings  was  to  get  between  the  extremes  of  the  restraint-of- 
trade  clause  and  the  monopoly  clause  and  in  this  wav  to  prevent,  so 
t.ir  as  we  ccnild  legitimately,  a  demoralization  of  bu.-ine>s  and  de- 
>truclivc  competition;  but  there  is  nothing  in  any  of  these  .speeches 
I"  in(Hcate  that  there  was  any  agreement,  express  or  implied,  to  do 
or  not  to  do  a  thing,  any  suggestion  that  each  one  was  boun<l  to 
maintain  certain  prices,  or  to  fix  certain  prices,  or  .invthmg  ot  tlu 
snrt.    The  ontrary  of  that  was  the  intention. 

\-  tn  wheilur  (.r  nut  this  is  a  goiKl  thing  to  do.  ,i^  i<.  wh(  ther  or 
ii"l  this  is  good  moral-,  as  to  whether  or  not  you  gentlemen  believe 
that  it  is  better  to  enter  into  a  .'r>tructive  comju  tition  of  the  old 
kind  than  to  iry  and  maint.iin  liie  tc|uililirium  ut  l)usiness  by  this 
kind  of  C(K)peration,  is  for  you  to  say.  1  am  \erv  sure  if  vou  want  to 
take  the  -espoiisibility  as  legislators  and  as  lawyers  and  judges,  if 
you  w.^M  to  take  the  responsil)ility  <>r  if  the  Government  or  any- 
hiH'y  else  in  authority  wishes  to  take  the  responsibility  of  saving 
it  IS  better  to  enter  into  a  destructive  competition,  and  for  the  steel 


m' 


,W8 


Industkul  ("ombinatioxs  and  Trusts 


I)e()[)le  to  have  nothing  whatever  to  do  with  o  another,  not  even 
give  one  another  information  of  any  sort  or  ck^cription,  letting  tlic 
business  take  care  of  itself  and  allowinji;  the  stronj^est  to  survi\o 
and  the  we.ike>t  to  p,o  down  and  the  general  demoralization  which 
would  naturally  result  in  business,  generally,  to  follow,  then  we 
have  nothing  to  say;  we  would  not  oppose  it  for  one  moment;  not 
a  moment.  We  have  done  what  we  have  con-idired  lust  to  be  done- 
for  the  interests  of  all  concerned,  and  within  the  lines  of  the  law  a>, 
w(    understand  it. 

Mr.  Bkall.  a.-,  I  understand  it.  Judge,  you  are  frank  enough 
to  say  that  through  the  medium  of  these  dinners  you  have  sought 
to  accomplish  the  same  result  that  would  be  accomplished  by  mak- 
ing agreements  among  yourselves  that  would  be  unlwaful,'  to  a 
greater  or  less  degree? 

Mr.  G ARV.  I  have  not  said  that,  but  I  have  said  that  we  have,  so 
far  as  we  could,  attempted  to  |)ri  vent  demoralization  and  destruc- 
tive competition.  We  ha\f  n(»t  been  successful,  but  we  have  been 
successful  to  a  large  extent. 

Mr.  Hkai.i..  Quoting  now  from  Mr.  IVlion,  on  page  22,  he  says: 

\ow,  I  ihitik  we  have  all  had  our  eyes  ojjcned  since  the  first  meetinRs  that 
were  held  here,  and  I  hu\K'  wc  are  goinj,'  to  kci't)  our  eyes  open,  and  are  not  K'>ins 
to  shut  them  up  to  llie  situation.  If  there  is  anytK)dy  who  thinks  the  prcseni 
liusiness  situation  will  be  improved,  stimulated,  hy  iuIIItik  prices,  he  oufihl  to 
consider  just  one  branch  of  our  business;  he  .should  look  at  the  fuels  and  argue 
from  those  facts. 

Then  he  takes  up  the  piu  iron  situation. 
Mr.    (lAKV.  Yes. 

Mr.  Bi;ali.  Who  i>  .Mr.  Topping,  whose  speech  appears  on 
|)age  2.^? 

Mr.  Gary.  He  is  chairman  ui   tin    ImiiuMh    Inm  I'v  Steel  Co. 


Mr.  BiCAi.i..  I  read  from  what   Mr.  Topping  said,  on  page  23: 

I  am  more  convinced  than  ever  that  any  elTorts  at  this  time  lo  reduce  prirM 
ttilh  a  view  to  siimulatiiiK  eonsumption  will  \k  met  in  about  the  manner  that 
Mr.  I'elton  has  illustrated. 

Mr.  Gary.  Who  .says  that? 
Mr.  Bkall.  Mr.  Topping.     He  continues: 

The  price  line  will  go  down  much  faster  than  the  production  line  will  go  up. 
'  Thu.s  in  original.— Ed. 


Trust  Methods 


399 


Mr.  Gary.  He  has  evidently  chansed  his  mind  recently. 

Mr.  B1.AI.L.  H  ■  -s  made  a  reduction  in  the  i)rices  of  the  [irofiucls 
of  the  RepubHc  uon  &  .Steel  Co.? 

Mr.  Gary.  Ve.-^:  and  for  the  announced  reason  that  some  of  the 
l)eni)le  manufacturing  some  of  his  products  he.^an  to  cut  their 
|)rices,  and,  of  course,  he  assumed  he  had  nothing  left  to  do  but  cut 
hi>.  Three  '  is  quite  a  difference  in  one  man  ,  )ing  to  another  and 
saying  to  him,  "My  prices  an-  so  and  so;"  and  then  going  out  and 
Mlling  at  a  lower  price,  and  on  another  ()cca.sion  going  to  his  neigh- 
i)or  and  saying,  "My  prices  are  so  and  so,  and  I  think  they  are  loo 
high,  and  I  can  not  maintain  them  on  account  of  the  competition 
1  have  and  I  am  going  to  cut  them  to  suit  myself."  Then  it  is  not 
(li>honorabk  for  him  to  do  what  he  pleases.  "But  I  do  not  think  it 
is  fair  or  honorable  for  business  competitors  to  represent  to  one 
another  that  they  arc  doing  certain  things  v.hich  are  entirely  con- 
trary to  the  facts;  and  there  is  nothing  like  publicity  among  decent 
men— that  is,  the  disclosure  from  one  to  another  of  exactly  what 
they  are  doing— to  secure  a  reasonable  maintenance  of  prices.  Of 
course,  circumstances  arising  day  by  day  may  change  circumstances; 
Init  in  the  main  the  i)rices  are  pretty  well  maintained. 

Mr.  Hkali,.  After  that  luncheon  you  held  a  few  days  ago,  you 
Rave  out  a  statement? 

Mr.  (Jarv.  T  niadi'a  pnlilic  announcement  of  what  we  were  going 
to  do. 


men 


Mr.  Beall.  Substantially,  that  it  was  the  opinion  of  the  gmtle- 
who  were  at  that  luncheon  that  the  prices  of  tluir  \arious 


l)nHlucts  should  be  reduci     to  meet  this  cut  made  by  the  Reiuiblic 
''  r]  iV  Iron  Co.? 

Mr.  Gary.  1  think  not.  If  you  have  got  it,  read  it.  and  I  think 
it  will  speak  for  itself. 

.Mr.  Barti.ktt.  I  do  not  say  that  it  bears  that  out.  but  I  have 
what  purj)()rl>  tobia  pre?s(lis|)atch,  publi>hed  in  a  paper  in  Macon, 
Ga.,  and  I  will  read  V( 


)U   w 


hat 


IS  said 


Mr.  Y 


OUNO.  Will  you  not  speak  a  little  louder.  Judge? 


Mr.  BARTi.r.TT.  I  say  that  I  haw  what  Judgi'  (lary  is  purported 
to  have  .said  at  that  luncheon,  in  the  form  o{  a  press  dispatch  d.iti d 
June  4;  is  that   right? 

.Mr.  Gary.   I  presume  th.it   is  right. 

Mr,  BARTiitT.  I  cut  tl;is  from  a  paper  published  in  Macon,  Ga., 
and  it  pur|X)rts  to  be,  and  i-.,  a  press  di>patch. 
*  Thus  in  uriginal. — Ed. 


400 


TvnuSTKlAL    L'uilBINAliONS    W!)     TRUSTS 


Mr.  G      1.  I  think  I  can  tell  you,  if  you  wil 
Mr.  Baktlktt.  I  will  read  this  i)art  of  it: 


read  it. 


Referring  to  the  bombshell  which  the  Republic  Co.  ihrcw  into  the  sttvl 
market  by  rcdui  ins  prices,  Judi;e  (Jary  said:  "We  arc  confronted  with  a  very 
serious  and  dis.ij;reeable  |)roi)l'.>ni.  It  is  not  for  me  to  critici.  e  men  nor  to  pa?-, 
judgment  on  the  motives  oi  men.  Whether  people  who  have  changed  their 
minds  suddenly  are  actuated  by  motives  of  cupidity  or  motives  of  necessity  i> 
not  for  me  to  s;iy.  One  thing  we  know,  that  one  of  the  leading  iron  and  stcil 
companies  hitherto  joining  in  our  councils,  learning  from  us  our  intentions,  our 
business,  our  methods,  our  clients,  our  customers,  everything  of  benefit  and 
interest  fo*-  one  to  know  concerning  his  neighbor,  has  sufhienly.  for  reasons 
considered  good  Ijy  those  in  charge,  given  notice  that  for  the  present  at  least  it 
is  not  desirable  to  coo|>erate  with  us." 

.Mr.  ("i.\RY.   I  have  no  doubt  I  said  thai,  in  substance. 
Mr.  H  ".RTiXTT.  It  is  fair  to  quote  from  soinethinji  else  which  you 
are  [)urported  to  have  said.    It  refers  to  price  cutting: 

I  have  urged  you  to  remember,  and  I  again  call  attenti(m  to  the  fact,  that 
when  you  make  substantial  reductions  in  jour  prices,  if  ^'ou  reduce  to  a  prire 
that  is  unfair  an<l  unreasonable  and  you  make  so  small  a  prollt  that  it  does  not 
yield  you  a  fair  return  on  your  investment  and  your  risk,  you  at  least  place  tor 
consiileration  before  everyone  the  |X)ssible  neces^ity  of  reducing  the  cost  oi 
production,  including  prominently,  if  not  principally,  the  wages  which  you  are 
paying,  or  may  be  allowed  to  pay,  to  the  man  or  the  men  in  your  employ.  Do 
not  forget  that  the  laboring  men — the  employees  of  the  corporations— have 
more  at  risk,  when  these  i]uestions  are  considered  of  reducing  price-^  below  what 
is  reasonable  and  fair,  than  the  employer.  Vou  have  no  right  to  run  the  risk  of 
being  compelled  to  jml  tiieir  wages  below  whal  they  on-  it  to  be  unless  you  arc 
driven  to  it,  and  I  hope,  under  the  present  circuinstances,  gentlemen,  that  what- 
ever may  be  done,  or  whatever  may  hapi)en  ;is  a  result  of  present  conditions, 
you  will  not  reduce  the  wages  of  your  employees  until  you  feel  it  is  an  absolute 
necessity  to  do  so. 

Mr.  Gary.  I  said  that.  I  believe  it.  I  tiiink  you  will  fiml  at  one 
of  these  dinners  which  has  been  referred  to  the  i)rincipal  topic  tor 
discussion — the  substance  of  most  of  the  speeches,  at  least — related 
to  the  welfare  of  employees.  I  am  very  sure  it  did.  I  do  not  think 
the  (|uestion  of  prices  was  hardly  riferred  to. 

.Mr.  Bi;\i.r.  In  this  staleine.il,  Judge,  you  said: 

It  was  the  unanimous  opinion  that  cooperation,  as  heretofore  fully  explained, 
should  be  continued. 

I  cjuote  that  from  the  .New  Vork  World. 

.Mr.  Gary.  I  think  that  is  true. 

.Mr.  lit M.i,.  This  article  in  the  World  says,  further: 

Opinions  were  expressed  that  recent  developments  seem  to  require  some 
change  ill  prices.    Subsidiary  com|>anies  of  the  I'niied  Stales  Steel  Corporation 


Trusi    .MrriiDDS 


401 


become  ofTei:ti\e  June  i,  and  it  is  be- 


have decided  to  make  adjustments  u 
lifved  these  will  Ije  i^enerally  followed. 

Do  ynu  know  whether  the  action  of  the  United  States  Steel  Corjio- 
ratiun  has  been  generally  folltnved  or  not  tjy  conijjeting  concerns? 

Mr.  Gary.  I  tliinl<  it  has,  and  perhaps  a  httle  ni(jre  than  followed 
by  some.  I  do  not  see  how  any  of  the  others  could  keep  their 
prices  up  after  we  reduced  ours.  As  1  said  before,  it  is  pretty  easy 
to  reduce  prices.  That  is,  if  even  a  small  manufacture...  if  he  is 
a  >ul)stantial  coinpetitor.  reduce^  hi-^  iiricc.^,  of  cour.-^e  the  others 
reduce  theirs. 

.Mr.  Be.\ll.  On  page  24  there  is  a  little  statement  from  you. 

Mr.  G.\RY.  Of  what  meeting? 

.Mr.  Bk.\ll.  This  is  all  of  the  meeting  of  January  11,  kjii.  1 
read  as  follows: 

I  only  want  to  call  attention  to  the  exact  facts  here  so  as  to  make  it  certain 
that  none  of  us  will  unintentional!)'  misrepresent  the  facts.  Ir  respect  to  some 
C('mmodities,  I  am  sure  at  the  present  time  they  are  tou  low.  One  other  thouf,'ht. 
I  a„'ree  with  all  that  has  been  said  by  .Mr.  Topping  and  Mr.  I'elton  and  others 
tuiicerninK  Mr.  I  arrell.  Wm  know  about  how  proud  I  am  of  the  fact  that  he 
is  not  only  loyal,  but  that  he  is  enthusiastic  with  reference  to  this  policy  of 
maintenance  of  hij;her  prices,  particularly  smh  looperation  as  advance>  the 
interests  of  all  concerned. 

.Mr.  LiNDAHL  Kv.  That  is  in  the  middle  of  the  sentence,  where 
you  have  .--topped. 
Mr.  Bk.vll.   I  will  read  on: 

.\nd  yet  we  may  unintentionally  l)y  inference,  some  of  us,  in  referring  to  him 
do  an  injustice  to  Mr.  Corey,  and  as  he  is  not  [iresent,  I  think  1  am  juitilied  in 
saying  that  none  of  you  I  am  sure  will  say  nor  do  you  think  that  in  a  sinjjie 
in>t.ince  did  Mr.  Corey  ever  give  you  his  word  con(c■rnin,^'  what  he  intended  to 
do  without  keeping  that  word  to  the  letter. 

Mr.  Gary.  I  believe  therein  one  word  there  that  was  not  in  the 
speech,  but  I  do  not  know  that  it  is  at  all  important. 

Mr.  iii.M  I..  What  wonl  is  that? 

Mr.  Gary.  That  is  the  word  '  higher."  It  reads:  "The  mainte- 
nan(  (■  of  higher  prices." 

Mr.  Hi;.\i,[,.  It  says:  "With  reference  to  this  policy  01  mainte- 
nance of  higher  prices. " 

Mr.  Gary.  Yes.  I  do  not  know  uh.it  ihat  would  mean  or  could 
mean,  and  I  do  not  believe  I  ever  said  it  I  believe  it  is  either  a 
t>pogr.iphical  error  or  a  stenograpliic  error,  because  you  uill  I'lnd 
the  contrary  of  that  e.\pressu)n  in  many  of  my  statements. 


4o: 


Industrial  Combixatioxs  Axn  Trusts 


Mr.  Beau..  Who  is  Mr.  1.  A.  Kelly? 

]\Ir.  Gary.  He  is  the  prcsiiknt  of  some  company,  I  have  for- 
gotten the  name,  the  Ashland  Steel  Co.,  of  Ashland,  K>. 
Mr.  Beam..  .\t  the  top  ol  page  40  he  says: 

I  heartily  cooperate  in  everything  that  has  been  said  here  to-night,  and  so  far 
as  our  company  is  concerned  we  are  ready  and  willing  to  still  cooperate  to  do 
what  we  can  to  maintain  jirices.    [.Xpijlause.j 

Do  you  not  think  that  runnin<^  through  all  these  speeches  that 
were  made  at  the  banquet  the  idea  was  to  bring  about  such  a  condi- 
tion, without  going  into  any  iron-clad  agreement,  to  bring  about  a 
condition  where  no  man  who  attended  would  feel  in  honor  that  he 
could  take  any  action  tending  to  the  lowering  of  prices  in  stccl 
products?  Do  you  not  think  that  is  just  as  eftective  as  an  agree- 
ment signed  and  sealed  by  all  those  who  attended  the  dinner? 

Mr.  G.\RY.  It  is  not,  or  anything  like  that.  It  is  not  eilectivc; 
it  is  influential.  These  meetings  were  calculated  to  influence  people 
to  maintain  their  prices.  There  is  no  doubt  of  that,  but  as  I  undrr- 
stand  the  vice  of  the  law  is  in  obligating  i)e(>])le  to  maintaiii  prici-. 
in  iireventing  absolute  freedom  on  the  part  of  each  one  to  do  as  he 
pleases.  I  think  the  vice  in  conduct  which  is  unlawful  is  found  in 
the  release  of  one's  frei'diim  to  do  exactly  as  he  pleases.  It  was 
intended  to  influence  people  so  'ir  as  we  legitimately  could  tn 
maintain  fair  jirices,  each  one  for  himself  using  his  best  judgnunt, 
after  full  knowledge  of  the  business  of  all. 

Vou  will  see  where  I  have  said  at  ditTiTent  times  exactly  what  I 
had  in  mind  what  we  would  do  and  what  we  would  not  do.  That 
was  the  cardinal  doctrine. 

Mr.  LiTTi.t:i'>N.  1  )id  I  understand  you  to  say  that  you  considered 
that  the  Sherman  antilru.-^t  law  did  not  mean  a  contract  or  agree 
nuiil  unless  it  was  one  that  was  enforciblc  by  either  party? 

Mr.  Gary.  \o;  I  would  not  say  that.  No;  I  think  an  agreement 
to  maintain  prices  even  though  you  could  not  enforce  it  would  be 
contrary  to  the  Sherman  antitrust  law;  but  I  think  that  if  two  1  r 
three  of  us  should  come  together  and  say:  "We  will  tell  you  what 
we  are  doing  all  the  time,  we  will  not  agree,  but  we  will  not  change 
it.  and  if  we  change  we  will  notify  you.  We  will  not  put  ourselvc- 
in  a  po>ition  where  our  freedom  to  do  as  we  plea.se  is  in  any  respect 
abridged,  but  we  would  like  to  have  fair  prices  maintained.  \\'' 
think  it  is  for  the  best  interests  of  all  concerned,  ourselves  and  our 
employees  and  customers,  to  maintain  fair  prices  and  to  prevent 


Trust  Mf.thods 


403 


n-ort  to  tricks  in  the  trade  ciilculattfl  Id  unfairly  and  indect-ntiy 
ml  l)usiness  away,  which  always  rtsults  in  dt-structi-.x'  competition." 
1  think  that  is  aU  {)eriectly  lef^'ilimate  in  view  of  ihe  Sherman  anti- 
trust kiw.  That  has  been  my  idea.  1  will  be  very  glad  to  have  the 
opinion  of  Mr.  Littleton  or  Jud<:;e  Bartlett  or  anyone  el>e  on  that 
>ul)ject.  Certainly,  if  f  thouj^ht  it  was  wronj^  or  that  we  wrrf 
(loinfi  anytiiin<^  wru.iK,  I  would  not  continue  it  for  one  moment. 

Mr.  LiirLi:T(»N.  Suppose,  judj^je  Gary,  that  we  agree  that  the 
Sherman  antitrust  law  would  forbid  an  agreement  to  maintain 
prices,  if  you  had  entered  into  one  at  one  of  these  dinners.  I  think 
that  could  not  be  disi)Uted? 

Mr.  Gary.  No,  sir. 

Mr.  Littleton.  Now,  suppose,  Judge  Gary,  you  came  together 
and  by  foreclosure  of  the  situation  each  to  the  other  by  this  mutual 
and  wcll-intenti(jned  coo[)eration  of  which  you  speak  the  same 
rc.iult  is  accompli>hed,  to  wit,  the  maintenance  of  prices,  the 
object  which  the  Sherman  antitrust  law  sought  to  prohibit  has  been 
a((iimplishcd,  has  it  not? 

Mr.  Gary.  Xo,  sir;  1  do  not  think  it  has. 

Mr  Littleton,  ^'ou  think  that  the  Sherman  antitrust  law  was 
directed  at  the  agreement  rather  than  the  result  of  the  agreement? 

Mr.  Gary.  I  think  so:  I  do,  really. 

Take  the  case  of  two  blacksmiths,  for  instance,  and  they  come 
down  the  sidewalk  together  in  a  village  town  ever>'  day;  one  lives  on 
one  side  of  the  street  and  the  other  on  the  other  side,  and  one  says 
to  the  other:  ''What  are  you  charging  for  shoeing  horses?  I  am 
(harging  a  certain  price.'"  The  other  .-.ay-:  "Well,  1  am  charging 
that  same  price,''  and  that  ir>  all  that  takes  jilace,  and  the  result 
it '  that  they  maintain  those  prices.  I  do  not  believe  that  that  would 
I'  a  violation  ol  tlv  Sherman  antitrust  law.  It  does  not  seem  to 
me  that  it  is  intended  to  prevent  that.  The  re-ult  i>  ju;  t  the  >anie 
a>  though  they  had  agreed. 

Mr.  I^ittlkton.   Hut  would  not  that  be  because  there  was  no 

ilii'd  between  iheni? 


iLTcemen 


t  eit! 


ler  express  or  nnpliei 


Mr.  Gary.  Perhaps  it  would. 

Mr,  Littleton.  If,  by  foreclosure  of  the  situation  of  each  to  the 
other,  and  if  by  this  mutual  and,  I  will  say,  well-intentioned  coo[)or- 
ation  and  meeting  together,  and  if,  by  the  e\i)erienc,e  of  conference, 
each  understanding  the  other,  it  might  not  come  to  a  common  point 
with  a  common  ])ur[)os(",  each — obliged  by  his  natural  sense  of 
'  I'lius  in  original. — Ed. 


404 


Inui.-ikial  Comi;i\aii()N>  anu  Trusts 


honor — should  led  obliged  to  maiiituin  prices,  docs  not  that  hrini:; 
about  the  same  result  as  if  there  were  an  ai^reement? 

Mr.  Gary.  Xo;  it  dot  >  nut  brin^  .ibout  the  ^ame  result. 

Mr.  LiTTLKTox.  So  far  as  the  elTect  on  the  trade  is  concerned? 

Mr.  Gary.  \o;  it  does  not  by  a  ^ood  deal. 

•Mr.  Littleton.  Perhaps  I  did  not  add  one  condition;  suppose 
they  did,  then  it  does  accomplish  the  same  purpose? 

Mr.  Gary.  Of  course  if  you  and  1.  knowin,^  exactly  what  the 
other  is  doinj^  from  time  to  time,  continue  to  do  that  same  thiiiL,', 
then  the  result  is  the  same  as  if  you  and  I  afi;ree  to  do  that. 

Mr.  Littleton.  You  will  rtcal! — I  do  not  recall  it  exactly — one 
of  Mr.  Lincoln's  favorite  illur-trations  that  if  four  men  in  four 
counties  each  whittled  on  a  piece  of  wood  for  four  or  hve  days  and 
met  at  the  county  seat  and  put  their  pieces  of  wood  on  a  table  and 
they  all  fitted  with  each  other  that  he  would  ask  nobody  to  furni-h 
him  with  any  evidence  of  the  fact  that  they  had  had  an  agreement 
in  advance  that  they  would  all  whittle  in  a  certain  direction  and 
that  they  would  meet  there,  .ind  he  thouf^ht  that  was  the  highest 
authority. 

Mr.  Gary.  I  am  not  familiar  with  that.  I  am  certain  in  our  ci:c 
the  sticks  do  not  t'lt.  The;  never  have  fitted;  th^y  have  nev.r 
been  like  anything  else. 


The  Chairman.  1  will  call  your  attention  to  a  statement  pur- 
porting to  come 

Mr.  Gary  (interposing").  The  intention  has  been  and  the  effect 
has  been  to  maintain  reasonal)le  pric>e  '  more  or  less  all  the  time  on 
the  part  of  those  connected  with  it.  I  have  hoped  t'^  't  it  would 
be  very  extensive  and  at  some  times  1  have  thought  it  ;s,  but  the 
results  have  not  been  like  they  v-ould  ha\T  l)een  if  there  had  been 
an  agreement  with  a  penalty  such  as  used  to  be  made  before  I 
came  into  the  business  at  all. 

ExjiiniT  0 

OF    AMERICA  - 


The  Government  alleges  that: 
.  ,  .Among  other  methods  of  harassing  such  independents  defend- 
ant used  the  following:  It  would  deh^y  forwarding  billsof  lading,  and 

'  Thus  in  original. — Kd. 

^  Uiiitfd  Stales  of  America  v. ,/  Anifi  ra.     IVlition  In  Equity,  In 

the Court  of  the  United  States  for  the »J!*rict  of ,  pp.  23-26- 


Tkust  Mkthods 


405 


would  R'fuse  to  supply  iiKk'pendenls  further  with  metal,  sometimes 
abruptly  ceasing  entirely  to  ship  metal  without  warning  or  state- 
ment of  excuse  of  any  kind,  or  causing  its  controlled  companies  to 
do  so.  so  that  the  concern  alTected  was  unable  to  till  its  orders. 

It  discriminated  again-t  independents  as  to  price  for  the  crude 

needed,  so  that  they  were  unable  successfully  to  bid  against 

or  compete  with  the  favored  indu^tries  and  obtain"a  living  margin 
of  profit. 

It  frequently  refused  to  sell  — —  metal  to  those  desiring  to  enter 

the  business  of  manufacturing   goods,   thereby  preventing 

an  expansion  of  the  industry  and  restraining  trade  therein. 

It  refused  to  sell  to  others  desiring  to  enter  said  field  any 

metal  unless  they  would  agree  not  to  engage  in  anv  line  in  any 
mannercompeting  uith  the  line.',  of  the  det'endant  amJ  it.-  allied 
companies. 

It  refused  to  guarantee  quality,  and  at  times  deli\ered  to  com- 
peting plants  metal  which  was  known  to  be  worlhle>s  and  which 
hud  been  rejected  by  jilants  allied  to  defendant. 

It  demanded  to  know  the  jirices  at  which  independent  compet- 
itors had  bid  on  or  taken  contract>  for  work  tt)  be  done  before  it 
Would  furni>h  them  the  metal  required  to  till  the  contract  or  even 
quote  prices  of  >ame,  and  it  would  impart  the  knowledge  thus 
obtained  to  an  allied  comj)any  ci)nii)eting  with  such   jiurchaser. 

It  represented  and  intimatei'l  to  inde])endent  concerns  and  cus- 
tomers that,  unless  they  dealt  with  defendant  or  its  allied  comjjanies 

as  to  crude  .  their  supjily  thereof  would  Ije  cut  olT,  or  they 

would  be  unable  to  get  their  entire  supi)ly  at  rea.sonable  prices. 

It  rei^resented  and  intimated  to  dealers  in  and  consumers  of 

wares  that,   unless  they  dealt   with  defendant  or  its  allied 

companies,  their  .-upplv  of  the  manufactured  pruducl  w(juld  be 
cut  otT. 

It  represented  and  intimated  to  consumers  that,  if  thev  did  not 
buy  of  the  defendant  or  of  its  allied  companies,  they  would  be 
buying  of  manufacturers  who  would  be  without  the  metal  to  com- 
plete their  contracts,  and  intimated  to  consumers  that  a  new 

agreement,  such  as  had  been  in  elTect,  would  be  put  into  eiTect 
a^'ain,  thereby  leaving  defendant  the  only  source  of  supply  within 
the  United  States  at  any  price;  and  it  was  especially  by  this  con- 
duct that  big  Consumers  \\ere  (JrisiTi  a\say  from  conijieling  manu- 
faiturcrs. 

One  competitor   who  was  jireparing  to  enlarge  his  [)lant   was 


40() 


IXUfSTRIAI     CoMniXATIONS    AND    TRUSTS 


threatened  by  defendant  that  if  he  did  so  he  wnald  he  put  out  of 
business  (the  defendant  i)einf^  at  >aid  time  the  sole  .ivailaljle  sourcf 
of  :-up[)ly  for  the  raw  material  needed j. 

It,  either  directly  or  through  its  controlled  companies,  bid  on 
supplies  for  the  best  customers  of  the  independent  competing  com- 
panies at  such  i)riccs  that  it  was  impossil)le  for  such  companies, 
who  were  compelled  to  purchase  their  raw  material  from  defendant, 
to  successfully  compete  therewith. 

Defendant  claimed  to  have  gone  into  the uten>il-  business 

for  the  purpose  of  increasing  the  market  for  its sheets  fai-ter 

than  it  was  beini^  de\elope(i.  Vet,  when  it  entered  upon  this 
branch  of  the  industry  it  purposely  was  subjecting?  the  then  makers 
of  such  utensils  to  delays  on  shipments;  and  petitioner  alleges  that 
ha\ing  seen  that  such  manufat  •.  "  was  growing  into  a  {iroiitable 
ijusiness,  it  entered  therein  for  the  purpose  of  monopolizing  it, 
along  with  the  other  branches  of  the industry. 

Certain  large  cust(miers  of  defendant  for  a  time  made  only  novel- 
ties of  ,  in  which  business  neither  defendant   nor  an  allied 

company  was  engaged.     During  said  period  the}-  had  no  trouble 

about  getting  from  defendant  a  sufficient  supply  of  of  any 

desired  kind  and  specifications.  Later  some  of  these  firms  en- 
tered into  the  business  of  making  utensils  of  .     Thirt - 

upon  dflays  and  harassments  in  obtaining  metal  from  defendants 
were  btgun  and  continued.  At  or  about  the  time  some  of  such 
m.inufacturers  entered  into  said  competitive  business,  defendant 
threatened  that  if  they  engaged  theri'in  they  might  expect  lo>s. 
Such  threats  were  consummated  by  the  refusal  to  furnish  metal 
in  such  a  manner  and  in  such  (juantities  and  of  such  quality  as 
to  enable  such  firms  to  take  or  ])roperly  complete  orders,  and  thus 
some  were  comix' ''.'d  to  abandon  said  business. 

It  reciuired  some  customers  to  make  contracts  not  to  engage  in 
competitive  lines  of  manufacture,  and  also  at  times  required  an 
agreement  to  maintain  certain  fixed  prices,  or  prices  al:)ove  a  desig- 
nated minimum,  on  manuf.ictured  articles  in  sale  and  resale,  as  a 
condition  precedent  to  receiving  metal. 


CHAPTER  XIII 
RECENT    TRLST  IM.CISIONS 

TiiK  promini'ncc  Kivcn  tri  the  Standard  Oil  and  T()t)acc()  di'cisions 
tended  to  rcndiT  insisnilicant  >()mc  of  the  decisions  handed  down 
apainst  other  condonations,  and  to  obscure  ttie  fact  that  many  of 
these  decisions  are  reallv  of  lon^iderable  importance.  It  is  even 
l)o:>>il)le,  that,  whatever  may  Ije  the  etTect  of  the  two  former  notal)le 
decisions,  the  decrees  in  some  of  the  minor  cases  may  have  the 
elTect  of  restoring  in  the  case  of  such  coml)inations,  con(htions 
Mibstantially  the  same  as  the  status  quo  i)efore  their  formation. 
Therefore,  in  the  scope  of  this  chai)ter  there  have  been  iiuluded 
excerpts  from  other  decrees  besides  those  against  the  Standard  Oil 
and  the  American  Tobacco  Comixmies. — Ed. 

Exhibit  i 
decree  .•\g.\inst  tiip:  st  \nd.\rd  oil  comp.wy  * 
.Mr.  Chikf  Justick  Wiinr.  delivered  the  opinion  of  the  Court. 


The  debates  show  that  doubt  as  to  whether  there  was  a  common 
law  of  the  United  States  which  governed  the  subject  in  the  absence 
of  legislation  was  among  the  inlluenc.-r.  leading  to  the  passage  of  the 
act.  They  conclusivelv  -how,  however,  that  the  main  cause  which 
led  to  the  legislation  was  the  thought  that  it  was  reciuired  by  the 
•  lonomic  condition  of  the  times,  that  is,  the  vast  accumulation  of 
u-calth  in  the  hands  of  cori)orations  and  individuals,  the  enormous 
development  of  corporate  organization,  the  facility  for  combina- 
tion which  such  organizations  atTorded,  the  fact  that  the  facility 
was  bein"  used,  and  that  combinations  known  as  trusts  were  being 
multiplicHl.  and  the  wide-si>read  impression  that  their  power  had 
been  and  would  be  exerted  to  op{)ress  individuals  and  injure  the 
public  generally.  Although  debates  may  not  be  used  as  a  means 
for  interpreting  a  statute  lUuitcd  States  v.  Trans-Missotin  Ireighl 

40/ 


4o8 


I.NDU^IKiAL    CuMlilNATKJ.NS   AND     1'rUSTS 


Association,  lOO  U.  S.  ,518,  and  tuscs  cited)  that  rule  in  the  nature 
of  things  is  not  vi(jluted  by  resorting  to  debates  as  a  means  of  as- 
certaining the  environment  at  the  time  of  the  enactment  of  a  par- 
ticular law,  that  i-;.  the  hi>lory  of  the  jjcriod  when  it  was  adojjled. 


In  view  of  the  common  law  and  the  law  in  this  country  as  to 
restraint  of  trade,  whii  h  wc  ha\e  rcvicwid,  and  the  illum'inatinf; 
etTcct  which  that  hi>tory  mu~t  ha\ e  uticKr  the  rule  to  which  we  have 
referred,  we  think  't  results: 

a.  TIkiI  the  context  manifests  that  the  -tatute  wa-  drawn  in  the 
light  of  the  existing  practical  cdnception  of  the  law  of  restraint  of 
trade,  because  it  groups  as  within  that  class,  not  only  contracts 
which  were  in  restraint  of  trade  in  the  subjective  sense,  but  all  con- 
tracts or  acts  which  theoretically  were  attempts  to  m(mopolizc,  yet 
which  in  practise  had  come  to  be  considered  as  in  restraint  of  trade 
in  a  broad  sense. 

_  /).  That  in  \-iew  of  the  man}-  new  forms  of  contracts  and  combina- 
tions which  were  being  evolved  from  existing  enocomic  conditions, 
it  was  deemed  essential  by  an  all-embracing  enumeration  to  make 
sure  that  no  form  of  o  "'ract  or  coml)ination  by  which  an  undue 
restraint  of  interstate  01  loreign  commerce  was  brought  about  could 
save  such  restraint  from  condemnation.  The  statute  under  this  view- 
evidenced  the  intent  not  to  restrain  the  right  to  make  and  enforce 
contracts,  whether  resulting  froi-n  combination  or  otherw-ise,  w-hich 
did  not  unduly  restrain  interstate  or  foreign  commerce,  but  to  pro- 
tect that  commerce  from  being  restrained  by  methods,  whether 
old  or  new,  which  would  constitute  an  interference  that  is  an  undue 
restraint. 

c.  And  as  the  contracts  or  acts  embraced  in  the  pro\-ision  were 
not  expressly  defined,  since  the  enumeration  addressed  itself  sii-nply 
to  classes  of  acts,  those  classes  being  broad  enough  to  embrace 
every  conceivable  contract  or  combination  which  could  be  made 
concernii-ig  tratle  or  commerce  or  the  subjects  of  such  commerce, 
and  thus  caused  any  act  done  by  any  of  the  enumerated  methods 
anywhere  in  the  whole  field  of  human  acti\-ity  to  be  illegal  if  in 
restraiiit  of  trade,  it  iiu^vitably  follows  that  the  provision  necessarily 
called  for  the  exercise  of  judgment  which  required  that  some  stand- 
ard should  be  resorted  to  for  the  purpose  of  determining  wluth.r 
the  prohibitions  contained  in  the  statute  had  or  had  not  in  anygixdi 
case  l)cen  vi<jlale(l.      I'hu-  not  specifying  but  indubitablv  c'ontem- 


RixKNT    Trust  DKt  i:,ions 


409 


]>latin£;  and  requiring  a  siaadard,  it  follows  that  it  \va>  intendcfi 
thai  the  standard  of  reason  which  had  Ijcen  a[)plied  at  the  common 
law  and  in  this  country  in  dealing  with  subjects  of  the  character 
embraced  by  the  statute,  was  intended  to  be  tlie  measure  u^ed  for 
the  purpose  of  determining  whether  in  a  gi\en  case  a  particular 
act  had  or  had  not  brought  about  the  wrong  against  which  the 
statute    provided. 


Second.  The  contentions  of  the  parties  as  to  the  meaning;  of  the  stat- 
ute and  the  decisions  of  lliis  court  relied  upon  interning  those  con- 
tentions. 

In  substance,  the  propositions  urged  l)y  the  Government  are 
reducible  to  this:  That  the  language  of  the  statute  embraces  every 
contract,  combination,  etc.,  in  restraint  of  trade,  and  hence  its 
text  leaves  no  room  for  the  exercise  of  judgment,  but  simply  im- 
poses the  plain  duty  of  applying  its  prohit)itions  to  every  case 
within  its  literal  language.  The  error  involved  lies  in  assuming  the 
matter  to  be  decided.  This  is  true  because  as  the  acts  which  may 
come  under  the  classes  stated  in  the  first  section  and  the  restraint 
of  trade  to  which  that  section  applies  arc  not  spccitically  enumer- 
ated or  defnied,  it  is  o1)vious  that  judgment  must  in  every  case  be 
called  into  play  in  order  to  determine  whether  a  particular  act  is 
embraced  within  the  statutory  classes,  and  whether  if  the  act  is 
within  such  classes  its  nature  or  effect  causes  it  to  be  a  restraint  of 
trade  within  the  intendment  of  the  act.  To  hold  to  the  contrary 
would  recjuire  the  conclusion  either  that  every  contract,  act  or  com- 
bination of  any  kind  or  nature,  whether  it  operated  a  restraint  on 
trade  or  not,  was  within  the  statute,  and  thus  the  statute  would  bo 
destructive  of  all  right  to  contract  or  agree  or  combine  in  any  respect 
whatever  as  to  subjects  embraced  in  interstate  trade  or  commerce, 
.  ■  if  this  conclusion  were  not  reached,  then  the  co.itention  would 
require  it  to  be  held  that  as  the  statute  did  not  detme  the  things  to 
which  it  related  and  excluded  resort  to  the  only  means  by  which  the 
acts  to  which  it  relates  could  be  ascertained — the  light  of  reason — 
the  enforcement  of  the  statute  was  impossible  because  of  its  uncer- 
tainty. The  merely  generic  enumeration  which  the  statute  makes 
of  the  acts  to  which  it  refers  and  the  ab'^ence  of  any  dofmition  of 
restraint  of  trade  as  used  in  the  statute  leaves  room  for  but  one  con- 
clusion, which  is,  that  it  was  expressly  designed  not  to  unduly 
limit  the  application  oi  the  act  by  precise  definition,  but  while 


410 


Industrial  Combinations  and  Trusts 


clearly  fixing  a  standard  that  is,  by  defining  i!k  ulterior  bound- 
aries which  could  not  be  iiansLires-ed  with  impunity,  to  leave  it  to 
be  determined  by  the  lisht  of  reas(>n,  j^mided  by  the  principles  of 
law  and  the  duty  to  ai)ply  and  enforce  the  public  policy  embodied 
in  the  statute,  in  every  given  case  whether  any  particular  act  or 
contract  was  within  the  contemplatic  n  of  the  statute. 

But,  it  is  said,  persuasive  ;is  ihe-e  views  may  l)e,  they  may  not  he 
here  applied,  because  the  pre\  ious  decisions  of  this  court  have  given 
to  the  statute  a  meaning  which  expressly  excludes  the  construction 
which  must  re^-ult  from  the  reasoning  -tated.  The  ca-^es  are  i'nitnl 
States  V.  I'rcii^lil  Ass  Htation,  lOO  l.  S.  200,  and  United  States  v. 
/()/.  '  Traffic  Association,  171  U.  S.  505.  Both  the  cases  involved  the 
legality  of  combinations  or  associations  of  railroa^ls  engaged  in 
interstate  commerce  for  the  puqjose  of  controlling  the  cnducl  nl 
the  parties  to  the  association  or  combination  in  many  particulars. 
The  association  oi  combination  was  assailed  i.i  each  case  as  being 
in  \iolation  of  the  statute.  It  was  hekl  that  they  wer".  K  is  un- 
doul'ted  that  in  the  opinion  in  each  ca.^e  general  l.ipguage  wa> 
made  u>e  of ,  which,  when  separati'd  frdin  its  context,  would  justify 
the  conclusion  that  it  wasdcided  that  reason  could  not  !>'■  resortcl 
to  for  the  pur])ose  of  determining  wluther  the  acts  complainetl  nl 
wvTv  within  the  statute.  It  is,  however,  also  true-  that  the  nature 
,.ad  character  of  the  contract  or  agreement  in  each  case  was  fully 
i-eferred  to  .uul  suggestions  as  to  their  unreasonableness  pointed 
otit  in  (irder  to  indicate  that  they  wiTe  within  tlu'  prohibitions  tA 
the  -tatute.  .\s  the  cases  c.mnot  by  any  possible  conception  hf 
treati'd  as  authoritative  without  the  certitude  that  reason  '  i~ 
re.sor'.ed  to  for  the  purpose  of  deciding  them,  it  follows  as  a  niatte; 
of  C(;urse  that  it  must  have  been  held  by  th.e  light  of  reason,  since 
the  conclusion  could  not  have  bi.en  otherwise  reached,  that  the 
assailed  (dnlracls  or  agreements  were  within  the  general  enumer.i- 
lion  of  the  statute,  and  th.it  their  operation  and  etTect  brought  about 
the  re-tr,nnt  of  tr.ide  which  the  statute  prohibited.  'I'his  Ijeini; 
inevilalile,  the  dniuction  can  in  reasdii  oidy  be  this:  I'hat  in  tb> 
cases  relied  up. m  it  having  been  f(,uiid  tli.n  the  acts  complained 
of  Were  within  the  .statute  and  operated  to  produce  the  injuries 
which  the  --t.itiile  forbade,  thai  resort  to  reason  was  not  jiermissihle 
in  order  to  ;dli»\v  that  to  l)e  done  which  the  statute  prohibited.  This 
being  true,  the  rulings  in  the  cases  relied  upon  wh-n  rightly  ap- 
preciated were  therefore  this  and  nothmg  more:  That  as  consider- 
ing the  contracts  or  agreements,  their  necessary  etTect  .md  the  chir- 


Ri'.cKNi   Trust  DrccisfONS 


411 


actcr  <>t'  the  parties  by  whom  they  were  made,  they  ^vere  clearly 
nstrainl^  ul'  Iraile  within  the  purview  (if  the  statute,  they  could 
not  be  taken  out  of  that  category  Ijy  indul^zin;,'  in  j^eneral  reasoning 
as  to  the  expediency  or  non-expediency  of  having;  made  the  con- 
tracts or  the  wisdom  or  want  <■!  wi>dom  of  thi'  statute  which  pro- 
liiliited  their  beinji  made.  Th;!!  is  to  say.  the  cases  but  decided 
that  the  n;iture  ai.d  character  of  the  contracts,  creatinj:^  as  they  did 
a  conclusive  ]iresumi)tion  which  brought  liiem  within  the  statute, 
such  result  wa-  not  to  be  di-re','arded  i)y  the  >ubstitution  of  a 
jud'cial  appreciation  of  what  the  law  ou^^ht  to  be  for  the  plain  ju- 
dicial duty  of  enforcing;  the  law  as  it  was  made. 

but  a>ide  from  re:isonin^  >'  i>  true  to  say  that  the  cases  relied 
upon  do  no'  when  rij^htly  construed  >u.-tain  ihe  (Joctrinc  contended 
for  isestal)li-bi'd  In"  all  of  the  numerous  decisions  of  this  court  which 
I'.ave  apiilied  and  enforced  the  Anti-tru>t  Act,  sirce  they  all  in  the 
very  n;Uure  of  thin;;->  re>t  ui)on  the  premi.e  that  reason  was  the 
"iide  by  which  the  ;)rovisions  of  the  act  were  in  every  ca.-^e  inter- 
;ireled.  lu'leed  intermediat<  the  (leci^i(jn  nf  the  two  cases,  that  i>, 
after  t!ie  deci-ion  in  the  Frei\lil  Assorialion  Case  and  before  the 
decision  in  tlie  Joint  Traffic  Case,  ihe  ca>e  of  Hopkins  v.  I'nitcd 
'^■,':/<  s,  171  r.  S.  ::,7S.  was  decided,  the  opinion  bein,!i  delivt  r'd  bv 
Mi.  ju-tiic  I'eckh.im,  who  wrote  l)oth  the  vijiinions  in  the  /■'nii^ht 
As'Ocialioi!  and  the  Joint  Fraffic  cases.  \nd,  referrin;.,'  111  the 
Hopkins  Case  to  the  broad  claim  made  as  to  the  rule  of  interjireta- 
tion  announced  in  {hr  Freit^/tt  AssoeiatioiiCase.  it  was  said  ({>.  592): 
"To  treat  as  condemned  by  the  act  all  a^'reement.^  under  which,  as 
a  result,  the  cost  ol  conduct ini;  an  inter>tate  commercial  bu>iness 

;\  be  increased  wmild  eiil.ir:.;e  the  applic.ilion  of  the  act  far  tie- 
_.'ind  the  fair  meaning  of  the  l.in"uat;e  u-ed.  There  mu^t  be  some 
direct  and  imrnecliale  eiTi  c  t  upon  mter-tale  commerce  in  order  to 

•ine  within  tile  act."  \r,>\  in  tli>  Joint  7  Vc;//7<  c'u.sr  this  statement 
...i^  expre.s.->ly  reiter.it ed  .iiid  .ippoAed  .ind  illustrate d  by  e\am|>le; 
like  limitation  on  the  ^reneral  lanjj;ua^'e  u-ed  in  /n/i;///  .Issoeialion 
and  Joint  Traffic  Cases  is  iil-n  the  c  le.ir  result  cjI  H,  oirnl  \ .  .Xational 
U:rro\c  Co.,  180  U.  S.  70,  gj,  and  es[)ecially  of  Cincinnati  Packit 

'.  V.  Bay,  200  U.  S.  17Q. 

If  the  criterion  by  which  it  is  to  ho  determined  in  all  c.i>c^  whether 

'  Very  contract,  (iinibination,  etc.,  is  a  re^tr.iint  of  trade  within  the 

intendment  of  the  law,  is  the  direct  or  indirect  etlecl  of  the  acts 

'■ivolved,  then  of  course  «.he  '■'lie  of  rea-on  become^  the  Kuide,  and 

le  construction  which  wc  have  given  ihe  statute,  instead  of  being 


41-' 


InDUSTKIAI-    CoMlilNATKiN^    AND     TkISTS 


refuted  by  the  cases  relied  upon,  is  l)y  those  cases  demonstrated  to 
be  correct.  This  i~  true,  because  as  tlie  construction  whi'  .1  we  have 
tleduced  from  the  hi-.ory  of  the  art  and  the  analysis  its  text  is 
simply  that  in  every  case  where  it  is  claimed  that  an  act  or  acts  are 
in  violation  of  the  statute  the  rule  of  r-a-on,  in  he  li^dit  of  the  prin- 
ciples of  law  and  the  public  i)oIicy  whid'  the  act  embodies,  must  l)e 
api)lied.  I'rom  this  it  follow.-,  -ince  tliat  rule  and  the  result  of  tlu' 
test  a>  to  direct  or  indirect,  in  their  ultimate  aspect,  come  to  niu- 
and  the  same  thinu,  that  the  difference  between  the  two  is  therelurc 
only  that  which  obtains  between  thimzs  which  do  nut  dilTer  .at  all. 

If  it  he  true  that  there  i>  this  identity  of  result  betwe(  n  tile  rule 
;  tended  to  be  applied  in  the  l-rci'^kt  Association  Casr.  th.il  i.-.  llic 
rule  of  direct  .md  indirect,  and  the  rule  of  reaMMi  which  under  the 
statute  as  we  construe  it  should  he  here  a])plie(h  it  m.iy  lie  asked 
how  was  it  that  in  the  opinion  in  tln'  I'rci<'Jil  Assoriati'>n  ( 'asc  mui  h 
consideration  wa^  i^iven  to  the  subjec  I  nl  whether  the  aj^reement  or 
combination  which  was  invohfd  i:i  that  ca--e  could  be  taken  out  of 
the  prohibitions  of  the  statute  upim  tl,e  theory  of  its  reasonableness. 
The  (lue^tion  i-  lurtinent  and  n-,u>t  be  fully  and  fnmkly  met.  for 
if  it  be  now  deemed  that  the  I'rcii^lil  Associulion  Case  was  mistak- 
enly decided  or  too  l)roadly  stated,  the  doctrine  which  it  announced 
should  l)e  either  expressly  overruled  or  limited. 

TluM  onfu-ion  whicii  ^jives  rise  to  the  ([ue^tion  results  from  faiiiiiL' 
to  di-tin'j;ui-'h  hetwien  the  want  of  jiower  to  take  a  ca>e  which  h\ 
it--  t'Tui-  or  the  linum-tance-  whicii  -urrounded  it.  consitlernv;,' 
anion;;  -uch  circumstances  the  characti  r  of  the  ji.irtie-.  is  jilainly 
within  the  statute,  out  of  the  opcra»ion  of  the  -tatute  iiy  roorl  to 
re,i>on  in  elTect  to  e-t,.l)li->h  that  thi  (  ontract  ou;.;hl  trnt  tn  hr  tri'ated 
as  witliin  the  statute,  and  the  dut'  in  every  ca.st  v.ii>  re  it  heioims 
necessary  fmm  the  nature  .ind  chanicter  of  the  parties  id  decide 
whether  it  was  within  tiu'  statute  to  jjass  upon  that  ([uestion  by  the 
lis^ht  of  re.ison.  Thi-  di-linction,  wo  think,  serves  to  point  out 
wh.il  in  it-  ultiniat.'  otuepf'on  was  the  thoupht  underlyinjj  the 
refen'iue  to  the  rale  of  n.ison  made  in  (he  I-rcight  Association  Case. 
espei  i.dly  win  11  such  reference  is  interpreted  !;y  tiie  conle.vt  of  the 
ojjinion  .md  in  the  li^dit  of  the  subsequent  opinion  in  the  Hopkins 
Case  and  in  (.'ini  iniiali  Parkct  Company  v.  Hay,  200  L'.  -S.  ijc;. 

.\nd  in  order,  not  in  the  slightest  decree  to  be  wantinj;  in  frank- 
ness, we  say  that  in  so  far.  however,  as  i)y  sei)aratinjj  the  general 
ian^ua^e  u.^ed  in  lh(r  opinions  in  the  l'iei\;hl  Association  and  Joint 
Traffic  cases  from  the  conte.xt  and  the  subject  and  parties  with 


Recent  Trust  Di;(!-i()\s 


413 


^  ;■:  ihc  cases  were  conccriuii,  it  may  he  conci-ivni  t!;at  thr  laii- 
;:ua^'L'  rtiVrri'd  to  contlicts  with  the  eon-trurtion  whieh  ue  '^Wc  tb.e 
4atutc,  they  are  necessarily  now  Hmileil  and  <|ualitie(l.  We  see  no 
po>sil)k'  escape  f-om  this  conclu-ion  if  we  are  to  adheri'  to  the  many 
ca-;es  decided  in  this  court  in  which  ilie  Anli-tru-t  Law  ha>  been 
applied  anti  enforced  and  if  the  duty  to  apply  and  enforce  that  law 
in  the  future  is  to  continue  to  exi-^t.  'I'he  first  is  true,  because  the 
construction  which  we  now  t^iw  the  statute  does  not  in  the  sliditcst 
ilegree  conllict  with  a  single  previous  case  decided  concerninir  the 
Aiiii-trusl  Lav.  aside  from  the  contention  as  to  the  Freight  Associa- 
//'>;?  and  Joint  Traffic  cases,  and  because  every  one  of  those  cases 
a;)plied_the  rule  of  reason  for  the  purpose  of  determining  whether 
the  subject  before  the  court  was  within  tlie  statute.  The  second  is 
also  true,  since,  as  we  have  alread\-  pointed  out,  unaided  by  the 
liizht  of  reason  it  is  impossible  to  understand  how  the  statute  may 
in  the  future  be  enforced  ami  tiie  i)ul)lic  policy  which  it  establishes 
be  made  efficacious. 


Ciivim,'  to  the  faits  ju~t  stated,  the  weifjht  which  it  was  deemed 
they  were  entitled  to,  in  the  li-ht  atTorded  by  the  jiroof  of  other 
connate  facts  and  circumst.mces,  the  court  iXlow  held  that  the 
aris  and  (lealinRS  establishi  il  by  the  proof  ojjerated  to  destroy  the 
'■potentiality  of  competition"  which  otherwise  would  ha\e  ex- 
isted to  such  an  extent  as  to  cause  the  tninsiL-rs  of  stock  which  were 
made  to  the  Xew  Jersey  corjioration  and  the  control  which  resulted 
"\iT  the  many  and  \-arious  sul)siciiary  corporations  to  be  a  com- 
hination  or  conspiracy  in  restraint  ot  trade  in  violation  of  the 
tir-t  >ection  of  the  act.  but  .dso  to  be  an  attempt  to  mono{)olize  and 
I  mnnopoli/.ation  i)rin^in,;^  about  a  perennial  violation  of  the  second 


\\r  M-e  no  cause  to  doubt  the  correctness  of  these  conclusions, 

iMderinj,'  the  subject  from  every  aspect,  that   is,  both  in  view 

"I  the  facts  established  by  the  record  atid  (In    necessary  operation 

and  etTect  of  the  law  as  ue  lia\c  (onstrued  it  u))on  the  inferences 

il<«luclble  frtmi  the  facts,  for  the  follow in.L'  rea-.in>: 

•'.   lU-caUse  the  unification  of  jxiwer  and  control  over  petroleuni 

i  its  products  which  was  the  inevitable  result  of  the  coml)ininj^ 

in  the  .New  Jersey  corjwration  by  the  increase  of  its  stock  and  the 

irinsfer  to  it  of  the  stocks  of  so  many  other  corpor.it ions,  a;,'i';e),'at - 

ing  so  vast  a  cai)it,il,  ;;ives  rise,  in  and  of  ii.self,  in  the  alisence  o{ 


4M 


I.NDUSTKIAI.    ('(JMBI.NAIIONS    AM)    TRUSTS 


countiTvailiuR  tircumslancv^.  to  say  the  least,  to  the  pmna  Jane 
presumption  of  mleut  and  purpose  to  niaint.-.in  the  domhianey  over 
the  oil  industry,  not  as  a  rr-ult  ol"  nornia.  nn-thods  of  industrial 
de\elopment,  hut  bv  new  means  of  eoinl.iiiatitin  which  were  re- 
sorted to  in  order  tliat  jrrealer  power  nii^ht  be  adde(_l  than  would 
otherwise  have  arisen  had  normal  methods  been  followed,  t!ie 
whole  with  the  purpose  of  exeludin<!;  others  from  the  trade  and  thu> 
centrali/inR  in  the  combination  a  perpetual  control  of  the  movt - 
ments  of  petroleum  and  it^  i)roduct>  in  the  channel-  of  interstate 
commerce. 

/).  Because  the  prima  facie  pre-umption  of  intent^  to  restrain 
trade,  to  monopuli/e  ai'.d  to  \m\v^  about  monopolization  resultin;! 
from  "the  act  of  eNpandin^  the  stock  --f  the  New  Jer^ey  coriioratiuii 
and  ve-tiiiu'  it  with  >ueh  vast  control  of  i'.ie  oil  industr\,  is  nuidc 
conclusive  bv  coiiMderin-;.  ;.  the  condurt  of  the  persons  or  corpora- 
tions who  were  mainly  instrument. d  in  .•linjiins  about  the  extensioii 
of  power  in  the  Xew'jersev  cor])orati.>n  belore  the  ci)nsummati(iii 
of  that  result  and  prior  to  the  formation  of  the  tru-^t  ai;reemeiit>  c! 
iSjoand  iSSj;  j,byconsidcrinKthcproof  aslo  wiuil  wa-done  under 
those  a'^reements  and  the  acts  which  innnedialely  |)receded  the 
vestintr  of  i)ower  in  tlie  New  Jersey  corporation  as  well  as  by  weiuli- 
\\vi  thr  modes  in  which  tlie  power  vested  in  that  corporation  ha- 
btru  exerted  and  the  n-ult-  which  have  arisen  from  it . 

Recurrinii  to  the  act>  done  by  the  individuals  or  cor]  .orations  wlio 
were  mainiy  instrumental  in  i)rin,ui;i'^  about  the  e\i)an-ion  of  ihf 
Xiw  [er-ev  corporation  during  the  period  prior  to  the  fo.mati.iii 
of  the  tni.>t  agreements  of  iSjo  and  sSSj.  ineludins  those  agree- 
ments, not  for  ill  i)uriiose  of  wei;;!iin,i,'  the  sub-^tanlial  merit  of 
the  numerous  charges  of  wron,L;doiii<(  made  durinji  >mli  lurind. 
but  solely  as  an  aid  for  discovering  intent  and  purpose,  we  thnil, 
no  di-intere>te(l  mind  can  survey  the  jHTiod  in  (|uestion  with(iul 
being  irre>i-libiy  driven  to  the  conclusion  that  the  very  genius 
for  commercial  development  and  organization  which  it  would  >eem 
was  manifested  from  the  beginning  soon  iK^ot  an  intent  ami  pur- 
pose to  exclude  others  which  was  fretiuentiy  manifested  by  acts 
and  dealings  wholly  incoii'-istent  with  the  theory  that  they  were 
made  with  the  single  concei»tion  of  advancing  the  deve'.opnunt  ot 
business  jiower  by  usual  methods,  but  which  on  the  contrary  neces- 
sarily involve.!  the  intent  to  drive  others  from  the  lield  an<l  to  .a- 
clude  them  from  their  right  to  trade  and  thus  accompli>h  the 
mastery  uhieh  was  the  end  in  view.     .Xnd.  considering  the  |)eruMi 


Recent  Trust  Decision's 


41S 


(it 


fn.m  the  date  of  the  trust  agreements  of  1S79  and  1S83,  up  to  the 
lime  of  the  expansion  of  the  Xew  Jersey  corporation,  the  f:;raclual 
(.xtcnMon  of  the  power  owr  the  commerce  in  oil  which  en^-ued, 
the  decision  ui  thi-  Supreme  Court  of  Ohio,  the  tardiness  or  reluc- 
tance in  conforming,'  to  llu'  commands  of  that  decision,  the  method 
first  adopted  and  that  v. h.ich  fmaliy  culminated  in  the  plan  of  the 
New  Jersey  ct^riKiration.  all  addition.dly  serve  to  make  manife>t  the 
continued  existence  of  the  intent  which  we  have  previously  indi- 
cated and  which  amonj^  other  thinf;s  impelled  the  expansion  of 
t!  Xew  Jersey  corporation.  The  exercise  of  the  power  which 
ri  -ulted  from  that  orj^'anization  fortifies  the  foretjoinj;;  conclusions, 
since  the  development  which  came,  the  acquisition  here  and  there 
which  ensued  of  every  etVicient  means  by  which  competition  could 
have  been  asserted,  tlie  >low  hut  resistless  methods  which  followed 
by  which  means  of  tran-jjort.ition  were  absorbed  and  brought 
under  control,  the  system  of  marketing  whii  h  was  adojited  by 
which  the  country  wa-  divided  into  districts  and  the  trade  in  each 
di-trict  in  oil  wa>  turned  o\er  to  a  designated  cor])oration  within 
ib.r  combination  and  all  others  were  excluded,  all  lead  the  mind  up 
tn  a  conviction  of  a  purpose  and  intent  which  we  think  is  so  certain 
a-  practically  to  cau-e  the  subject  not  to  be  within  the  domain  of 
rca-i)nable  contention. 

I'he  inference  that  no  attempt  to  monopolize  could  have  been 
intendi'd,  and  th.it  no  mono[)oli/..'tion  re.-ulted  from  th'^  act.  com- 
plained of,  since  it  i-.  e>lai)li-he(l  that  a  very  small  percentage  of 
the  crude  oil  produced  wa-'  controlled  by  the  combination,  is 
unwarranted.  As  sub>t.intial  power  over  the  crude  product  was 
tile  inevitable  re->uit  of  the  absolute  control  which  existed  over  the 
riliued  product,  the  monoj)oli/ation  of  the  one  carried  with  it  the 
power  to  control  tlieoiher.  and  if  the  inferences  which  this  situation 
su'.:gests  were  developed,  which  we  deem  it  unnecessary  to  do,  thev 
niifjht  well  ^erve  to  add  additional  >  ogency  to  the  presumption 
■  intent  to  monopolize  which  we  have  found  arises  from  the  un- 
questioned {iroof  on  other  subjects. 

We  are  thus  brought  to  the  last  subject  wliich  we  arc  called  upon 
to  consider,  viz: 

Fivnth.  The  remedy  to  he  administered. 

It  may  be  conceded  that  ordinarily  where  it  was  fmmd  that 
act?  had  been  done  in  violation  of  the  statute.  adequat»-  mea'^ure 
of  relief  would  result  from  restraining  the  doing  of  such  act>  in 
!' '  future.    Sivift  v.  United  States,  iq6  U.  S.  375.    But  in  a  case 


f  ! 


416 


I.NDUSTRIAI.  Combinations  and    Trusts 


like  this,  where  the  condition  which  has  been  brought  ab.ut  in 
violation  of  the  statute,  in  and  of  it~eh',  is  not  only  a  ct^ntinued 
attempt  to  monopolize,  but  also  a  monopoli/ation,  the  duty  to 
enforce  the  statute  recjuires  the  application  of  broader  and  more 
controllinfj;  remedies.  As  penalties  which  are  not  authorized  by 
law  may  not  bi-  inilirted  by  juflicial  authority,  it  follows  that  to 
meet  the  situation  with  which  we  are  confronted  the  api)lication  of 
rcmethes  two-fold  in  i  haracter  becomes  essential :  i^t .  To  forljid  the 
doing  in  the  future  of  acts  like  those  which  we  have  found  to  ha\L- 
been  done  in  the  i)a.-t  whith  would  be  \iolativi'  of  ihe  statute.  2d. 
The  exertion  of  -uch  n!ea>ure  of  relief  as  will  effectually  dissolve 
the  combination  found  to  e\i>t  in  violation  of  the  statute,  and  thu- 
neutralize  the  extension  and  conlinualiy  operating  force  which  the 
possession  of  the  ])ower  unlawfully  obtainetl  ha>  brought  and  v.ii! 
continue  to  bring  about. 

In  :ipplying  ri'medies  for  ihi-  purpo-e.  howewr,  the  fact  imi-' 
not  be  overlooked  that  injury  to  the  })ul)!ic  by  the  prevention  of  an 
undue  restraint  on,  or  the  monopolization  of  trade  or  conmiercc 
is  the  foundation  ujjon  which  the  |)rohibition-^  of  the  statute  rest, 
and  moreover  that  one  of  the  fundamental  iiurpo>eb  of  the  statute 
is  to  protect,  not  to  destroy,  rights  of  proi)erty. 

Di  ruKi;   \r,  \i\sr   nii.    wukhan   loBAfco  company.' 
Mr.  CiUi.i'  Jr-^nci.  Wiiin;  delivered  the  opinion  oi  the  Court. 


.  .  While  it  i--  argued  on  tl,*-  one  lumd  th.it  the  form-  by  wliiih 
various  j)roperlie>  \,ere  acquired  in  view  of  ilir  Utter  ol  the  act 
exclude  inany  of  the  a~-.iilrd  transaction.-,  from  condemnation. 
it  is  yet  urge(l  iliat  giving  to  the  act  the  broad  construction  which 
it  should  rightfully  receive,  whatever  may  be  the  form,  no  condem- 
nation should  follow,  because  looking  at  the  case  as  a  whole,  every 
act  assailed  is  shown  to  have  been  but  a  legitimate  and  lawful  result 
of  till-  exertion  of  honest  l)u>iness  methods  l)rought  into  play  for  the 
pur|)o>e  of  advancing  trade  in--tead  of  with  the  objei  I  of  oi)>lructin!; 
and  restraining  the  same.  Hut  tlie  dilliculties  which  arise,  from 
the  complexitv  of  the  particular  ilealings  which  are  here  involved 
and  the  situation  whidi  they  produce,  we  think  grows  out  of  t 

'  2il  U.  S.  106. 


Recext  Trust  Decisions 


417 


lil.iin  misconception  of  i)oth  the  letter  and  spirit  of  the  Anti-trust 
Ael.  W'e  say  of  the  letter,  because  while  seeking  by  a  narrow  rule 
of  the  Ktter  to  include  thinj,'s  which  it  is  deemed  would  otherwise 
he  excluded,  the  ctjiitention  really  destroys  the  great  purpose  of 
the  act,  since  it  renders  it  imp(,i>sible  to  aj^ply  the  law  to  a  multitude 
of  wrongful  acts,  which  W(nild  come  within  the  scope  of  its  remedial 
jmrposes  by  r^ort  to  a  reasonable  construction,  although  they 
would  not  be  within  its  reach  l)y  a  Ion  narrow  and  unreasonable 
adherence  to  the  strict  letter.  Thi-  must  be  the  case  unless  it  be 
pi)>,dble  in  reason  to  say  that  for  the  purptise  of  including  one  class 
of  acts  which  would  not  otherwise  be  embraced  a  literal  construction 
although  in  conlhct  with  reason  mu>t  be  applied  and  for  the  ;^r- 
po^e  of  including  other  acts  w  liii  h  would  not  otherwise  be  emliraced 
a  reasonable  construction  must  be  resorted  to.  That  is  to  sav 
two  conflicting  rules  of  construction  must  at  one  and  the  same  time 
be  applied  and  adhered  to. 

The  ob.scurity  and  resulting  uncertainty  however,  is  now  but 
an  abstraction  because  it  lias  been  removed  Ijy  the  consideration 
which  we  have  given  quite  recently  to  the  construction  of  the 
.Anti-trust  .\ct  in  the  SUuidard  Oil  Case.  In  that  case  it  was  held, 
without  departi'.ig  from  any  i)re\ious  decision  of  the  court  that  as 
the  statute  had  not  defined  the  words  restraint  of  trade,  it  l)ecanie 
necessary  to  construe  those  words,  a  duty  which  could  only  l)e 
discharged  by  a  resort  to  reason.  We  .s.iy  the  doctrine  thus  stated 
was  in  accord  with  all  the  previous  decisions  of  this  court,  despite 
the  fact  that  the  contrary  \  iew  was  sometimes  erroneously  attrib- 
uted to  some  of  the  e.\pre->ions  used  in  two  prior  decisions  (the 
Triiiis-}[is^oii)i  r'rcijit  Associalinu  and  Jo!)!l  Triiljh  cases.  1O6  U.  S. 
Jdo  and  171  U.  S.  ;o;.)  That  such  view  was  a  mistaken  cne  was 
fully  pointed  out  in  \\\i.-  Strjidard  Oil  Case  i\m\  is  additionally  shown 
by  a  i)a?sage  in  the  oi)inion  in  the  Joint  Traffic  Case  as  follows  1,171 
L'.  .S.  50S):  "The  act  of  Congress  must  have  a  reasonable  construc- 
tion, or  else  there  would  scarcely  be  an  .i:rreement  or  contract 
among  business  men  that  could  not  be  .said  to  have,  indirectly  or 
remotely,  some  bearing  on  interstate  commerce,  and  possibly  to 
re-train  it."  Applying  the  rule  of  rtason  to  the  construction  of  the 
st.ilute,  it  was  held  in  the  Standard  Oil  Case  that  as  the  words 

"estraint  of  trade  "  at  common  law  and  in  llu'  law  of  this  country 
.it  the  time  of  the  adoption  of  the  Anti-trust  .\ct  only  embraced 
acts  or  contra(t-  or  .igreenient'  or  combinations  whiih  operated 
to  the  prejudice  of  the  public  interests  by  unduly  restricting  compe- 


Hti 


li 


4i! 


I.NUUSTKIAI.   ("OMHINATIONS   AND   TRUSTS 


tition  or  unduly  obstructing  the  due  course  of  trade  or  which, 
either  because  of  their  inherent  nature  or  etTect  or  l)ecause  of  the 
evident  purpose  of  the  acts,  etc..  injuriously  re-trairie<l  trade,  that 
the  words  as  used  in  the  statute  were  di>i<?ned  to  have  and  did  have 
but  a  like  sii^nuicance.     It  was  therefore  pointed  out  that  the 
statute  did  not  forbid  or  restrain  the  power  to  make  normal  and 
usual  contracts  to  further  trade  by  resorlin.i^  tt)  all  normal  methods, 
whether  bv  ai^'reemenl  or  otherwise,  to  accomplish  such  purpose. 
In  other  wor.i>,  it  was  held,  not  that  acts  which  the  statute  pr<j- 
hibited  could  i)e  removed  from  the  control  of  its  prohibitions  by  a 
lindinf,'  that  thev  were  reasonable,  but  that  the  iluty  to  interpret 
which   inevitably   arose  from   the  geniTal   character  of  the  term 
restraint  of  trade  recjuired  that  the  words  rotraint  .)f  trade  should 
be  given  a  meaning  which  would  not  destroy  the  individual  right 
to  contract  and  render  difficult  if  not  impossible  any  movement 
of  trade  in  the  channels  of  interstate  commerce — the  free  move- 
ment of  which  it  was  the  purpose  of  the  statute  to  protect.    The 
soundne>s  of  the  rule  that  the  statute  should  receive  a  reasonable 
construction,  after  further  mature  deliberation,  we  see  no  reastm 
to  doubt.     Indeed,   the  necessity  for  not  departing  in  this_  case 
from  the  standard  of  the  rule  of  rea:-on  which  is  uni\x"rsal  in  its 
application  is  so  plainly  re'juired   in  order  to  give  etTect  to  the 
remedial  imrposes  which  the  act  under  consideration  contemplates, 
and  to  prevent  that  act  from  destroying  all  liberty  of  contract 
and  all  substantial  right  to  trade,  and'  thus  causing  the  act  to  he 
at  war  with  itself  by  annihilating  the  fundamental  right  of  freedom 
to  traile  which, on  the  very  face  of  the  act, it  was  enacted  to  preserve, 
is  illustrated  bv  the  record  before  us.    In  truth,  the  plain  demon- 
stration which' this  record  gives  of  the  injury  which  would  ari^L' 
from  and  the  jtromotion  of  the  wrong-^  which  the  statute  was  in- 
tended to  guard  again-t  which  would  roult   from  giving  to  the 
statute  a   narrow,   unreasoning  and  unheard  of  construction,  as 
illustrated  bv  tlu'  record  before  us,  if  possible  serves  to  strengthen 
our  conviction  as  to  the  correctness  of  the  ruU'  of  construction,  the 
rule  of  reason,  which  was  api>lied  in  the  Standard  Oil  Case,  the 
api)lication  of  which  rule  to  the  statuii'  we  now,  in  the  most  un- 
ecjuivocal  terms.  rcexpre>s  and  re-allirm. 

Coming  then  to  ai)plv  to  the  case  before  us  the  act  as  interpreted 
in  the  Standard  Oil  and  j)rcvious  cases,  all  the  difTicultics  suggested 
by  the  mere  form  in  whi(h  the  a-sailed  transactions  are  clothed 
become  o{  no  moment.     ■I1u>  follows  because  although  it  wa--  held 


Rkcen't  Trust  Decisions 


419 


ill  tlu'  Standard  Oil  Case  that,  jjivinK  to  the  statute  a  reasonable 
^instruction,  the  words  "  rc-traint  of  trade"  did  not  embrace  all 
those  normal  and  u.^ual  contracts  essential  to  individual  freedom 
and  the  rit^ht  to  make  which  were  necessary  in  order  that  the 
course  of  trade  niifiht  be  free,  yet,  as  a  result  of  the  reasonable  con- 
struction which  was  atTixed  to  the  statute,  it  was  pointed  out  that 
the  generic  designation  of  the  lirst  and  second  scLtions  of  the  law, 
when  taken  together,  embraced  every  conceivable  act  which  could 
possibly  come  within  the  s[)irit  or  purpose  of  the  prohibitions  of 
the  law,  without  regard  to  the  garb  in  which  such  acts  were  clothed. 
That  is  to  say,  it  wa>  held  that  in  \iew  of  the  general  language 
of  the  statute  and  the  public  policy  which  it  manifested,  there  was 
no  piHsibility  of  frustrating  that  jHilicy  by  resorting  to  any  di>guise 
or  subterfuge  of  form,  since  resort  to  reason  rendered  it  impossible 
to  escape  by  any  indirection  the  prohibitions  of  the  statute. 

Considering  then  the  undisputed  facts  which  we  have  previously 
stated,  it  remains  only  to  determine  whether  they  establish  that 
the  acts,  contracts,  agreements,  combinations,  etc.,  which  were 
assailed  were  of  such  an  unusual  and  wrongful  character  as  to 
bring  them  within  the  prohibitions  of  the  law.  That  they  were,  in 
our  o])inion,  so  overwhelmingly  results  from  the  undisputed  facts 
that  it  seems  only  necessary  to  refer  to  the  facts  as  we  have  stated 
them  to  demonstrate  the  correctness  of  this  conclusion.  Indeed,  the 
history  of  the  combination  is  so  replete  with  the  doing  of  acts 
which  it  was  the  obvious  purpose  of  the  .-li'tute  to  forbid,  so  demon- 
strative of  the  existence  from  the  beginning  of  a  purpose  to  acquire 
dominion  and  control  df  the  tobacco  trade,  not  by  the  mere  exertion 
of  the  ordinary  riglit  to  contract  and  to  trade,  but  by  methods 
devised  in  order  to  monopoli/.e  the  trade  by  driving  competitors 
out  of  business,  which  were  ruthlessly  carried  out  upon  the  assumji- 
tioii  that  to  v.-ork  upon  the  fears  or  play  upon  the  cupidity  of 
fom[)etitors  would  make  success  possible.  We  say  these  conclu- 
sions are  ine\it  dde,  not  because  of  the  vast  amount  of  proper! v 
aggregated  by  the  combination,  not  because  alone  of  the  many  cor- 
porations \\lH(h  tlie  ])roof  ^how>  were  united  by  resort  to  one 
device  or  another,  .\gain,  not  alone  because  of  the  dominion  and 
control  over  the  tobacco  trade  which  actually  exists,  but  because 
we  think  the  conclusion  o*"  wrongful  purpose  and  illegal  combina- 
ti'in  is  overwhelmingly  cstaiJished  by  'he  following  considerations: 
a.  By  the  fact  that  the  very  tirst  organisation  or  comliination  was 
impelled  by  a  previously  existing  tierce  trade  war,  evidently  in- 


420 


LnUUSTRIAL    C'oMB.'^aTIOXS   ANU     I'KLSlt 


spired  by  one  or  more  of  the  minds  which  brought  about  and 
became   parties  to   that   combination,      b.   Becau>e.    immediately 
after  that  combination  and  the  increase  of  capital  w.hich  followed, 
the  acts  which  endued  justify  the  inference   that   '  le  intentiini 
existed  to  use  the  power  of  the  ctjm.bination  as  a  vantage  ground 
to  further  monopolize  the  trade  in  t()l)acco  by  means  of  trade 
conllicts  designed  to  injure  others,  either  l)y  driving  competit()r> 
out  of  the  business  or  compelling  them  to  become  parties  to  a 
C(Mv.bination — a  purpose  whose  execution  was  illu.-t  rated  by  the  pluf; 
war  which  ensued  and  its  re>ult>,  by  the  snuff  war  which  foUowul 
and  its  results,  and  by  the  conllict  which  immediately  followed  the 
entry  of  the  combination  in  I'.ngland  and  the  division  of  the  wodd's 
bu>iness  by  the  two  foreign  contracts  which  ensued.     <:.  By  the 
ever-present  manifestation  which  is  exhibited  of  a  conscious  wrong- 
doing by  the  form  in  which  the  various  transactions  were  em- 
bodied from  the  beginning,  ever  changi^ig  l)Ui  ever  in  substance 
the  same.    Now  tiie  organization  of  a  new  comj)any.  now  the  control 
exerted  by  the  taking  of  stock  iii  one  or  another  or  in  >evcral,  ,-o 
as  to  ob>cure  the  re>ult  actually  attained,  ne\erthele.->.  uniform, 
in  their  manife>tations  of  the  puri)o--e  to  restrain  otliers  and  td 
monopolize  and  retain  power  in  the  handr^  of  the  few  \vho,  it  would 
seem,  from  the  l)eginnuig  contemplated  tlie  ma-tery  of  the  trade 
which  practically  followed,    d.  By  the  gradual  absorption  of  contn)! 
over  all  the  elt'ments  essential  to  the  successful  manufacture  ef 
tobacco  product-,  and  placing  such  control  in  the  hands  of  seem- 
ingly independent   corporations  serving  as  perpetual   l)arriers  to 
the  "entry  of  other-^  into  the  to])acco  trade,     c.   By  per>istent  ex- 
penditure of  millions  upon  millions  of  dollars  in  buying  out  [ilant-, 
not  for  the  purpose  of  utilizing  them,  but  in  order  to  close  them  up 
and  render  them   useless  for  the  purposes  of  trade.     /.  By  the 
constantly  recurring  stijnilations,  whose  legality,  isolatedly  viewed, 
we  arc  not  considering,  by  which  numbers  of  persons,  whether 
manufacturers,  stockholders  or  employe'es,  were  reifuired  to  bind 
themselves,  generally   for   long  periods,   not    to  compete  in  the 
future.    Indeed,  when  the  results  of  the  undisputrd  proof  which  v.e 
have  stated  are  fullv   apprehended,  and  the  wrong! ul  ads  whieh 
they  exhibit  are  considered,  there  comes  inevitably  to  the  mind 
the  con\  iction  that  it  was  the  danger  which  it  v^■as  deemed  would 
arise  to  indixidual  liberty  and  the  pui)lic  well-being  from  acts  like 
those  which  thi-  record  eNhil)its,  which  led  the  legislative  mind  to 
conceive  and  to  enat  t  the  Anti-tr\!-t  .\et,  considerations  whiih  al-o 


Rkcfat  Tuusr  Dk.cisions 


421 


^(•rvo  to  clearly  dcnion-tratc  that  thf  combination  here  assailed 
i-  within  the  law  as  to  leave  no  doubt  that  it  is  our  plain  duty  to 
apply  it^.  prohibitions. 

In  >tatint;  summarily,  as  ',ve  have  done,  the  'onclusions  which,  in 
uur  opinion,  are  plainly  deduciiilr  from  the  undisimted  facts,  we 
have  not  paus'jd  lo  j,'i\e  I  lie  i-caM>n>  why  we  ctjnsider,  after  ^reat 
Consideration,  that  the  elaborate  arj^unients  advanced  to  ^'ive  a 
different  complexion  to  the  case  are  wholly  devoid  of  merit.  We 
do  not,  for  the  sake  of  l)re\ity,  moreover,  stop  to  examine  and 
ili.-cuss  the  various  jjropo.^iiions  ur^jed  in  the  arf^amient  at  bar 
lur  the  puri)ose  of  demonstratin.ij;  that  the  subject-matter  of  the 
combination  which  v,e  tnd  to  exi>l  aiid  the  combination  itself  are 
not  within  the  -cope  of  the  Anti-tru-t  Act  because  when  ri<,ditly 
considered  they  are  merely  matters  of  intrastate  commerce  and 
therefore  subject  alone  to  -late  control.  \\\  have  done  this  because 
the  want  of  merit  in  all  tlie  arguments  advanci'd  on  such  subjects 
is  so  com])leteiv  e-tabli-hed  by  the  prior  decisions  of  this  court,  as 
pointed  out  in  the  Standard  Oil  Case,  a^  not  to  recjuire  restatement. 

Leadinj^  as  this  does  to  th.e  conclusion  that  the  assailed  combina- 
tion in  all  its  aspects— that  is  to  say,  whether  it  be  looked  at  from 
the  point  of  view  of  stock  ownership  or  from  the  standpoint  of  the 
principal  corporation  and  the  accessory  or  subsidiary-  corporations 
viewed  independently,  includinij  the  foreign  corporations  in  so  far 
a-  by  the  contracts  made  by  them  they  became  coo[)erators  in 
the  combination— comes  within  the  prohibitions  of  the  first  and 
>ec()n(l  sections  of  the  .\nti-trust  Act,  it  remains  only  finally  to 
consider  the  remedy  which  it  is  our  duty  to  apply  to  the  situation 
thus  found  to  exist. 

Tiif  remedy. 

Our  conclu^ion  being  that  the  combination  as  a  whole,  involving 

1  its  cooperating  or  associated  j)arts,  in  whatever  form  clothed, 
uir.stitutes  a  restraint  of  trade  within  the  I'lrst  section,  and  an  at- 
tempt to  monoiioli/e  or  a  monopoliz.ition  within  the  second  section 
of  the  Anti-trust  .\ct,  it  I'oUows  that  the  relief  which  we  are  to  afford 
m:>\  he  wider  than  that  awarded  by  the  lower  cnurt,  since  that 
::t  merelv  decided  th.at  certain  of  t'he  corporate  defendants  con- 
-liluted  conibinations  in  \iolation  of  the  first  section  of  the  act, 
111  cause  of  the  fact  that  they  were  formed  by  the  union  of  previously 
competing  concerns  and  that  the  other  defendants  not  dismis~cd 
from  the  action  were  parties  to  such  combinations  or  promoted 
iluir  purposes.    We  hence,  in  determming  the  relief  proper  to  i)e 


422 


IxurSlRIAI.    C'UMIUNATION:^    AM)    TlU'STS 


given,  may  nut  model  our  action  ujion  that  s^ninted  by  the  court 
below,  but  in  order  to  enable  u:>  to  award  relief  coterminous  with 
the  ultimate  redress  of  the  wrongs  which  we  find  to  exist,  we  mu>t 
approach  the  -subject  of  relief  from  an  original  point  of  \iew.  Such 
subject  nece>>arily  takes  a  two-fold  aspect— the  character  of  the 
permanent  relief  reijuircd  and  the  nature  of  the  temporary  relief 
essential  to  be  appFcd  pending  the  working  out  of  permanent 
relief  in  the  event  liiat  it  be  found  that  it  is  impossible  under  the 
situation  as  it  now  exists  to  at  once  rectify  such  existing  wrongful 
condition.  In  considering  the  subject  from  both  these  aspects 
three  dominant  intluences  must  guide  our  action:  i.  The  duty  of 
giving  complete  and  eO'icacicnis  effect  to  the  prohibitions  ol'the 
statute;  2,  the  accompli>hing  of  thi'^  result  with  as  little  injur}-  a.> 
possible  to  the  interest  of  th.-  general  public;  uivi,  :;,  a  i)r()[)er  regard 
for  the  vast  interests  of  jjrivate  property  which  may  ha\e  become 
\-ested  in  many  persons  as  a  result  of  the  acjuir-ition  either  by  way 
of  stock  ownership  or  "therwise  .)f  interests  in  the  stock  or  securities 
of  the  combination  with(jut  any  guilty  knowledge  or  intent  in  ai.. 
way  to  liecome  actors  or  participants  in  the  wrongs  which  we  lind  to 
have  inspired  and  dominated  the  combination  from  the  beginning. 
Mindful  of  these  considerations  and  to  clear  the  wav  for  tluir 
application  we  say  at  the  outset  without  stopping  to  amplifv  the 
reasons  which  lead  us  to  that  conclusion,  we  think  that  the  court 
below  clearly  erred  in  dismissing  the  individual  defendants,  tlie 
United  Cigar  Stores  Company,  and  the  foreign  corpiirations  ami 
their  subsidiary  corporations. 

Looking  at  the  situation  as  we  have  hitherto  pointed  it  out,  it 
involves  ditTiculties  in  the  application  of  remedies  greater  than  have 
beep  'iresented  by  any  case  invob'ing  the  .\nti-tru-t  Act  which  lias 
been  hitherto  considered  by  this  court;  First.  Because  in  this 
case  it  is  obvious  that  a  mere  decree  forbidding  >tock  ownership  l)y 
one  part  of  the  combination  in  another  part  or  entity  thereof, 
would  afford  no  ade<|uate  measure  of  relief,  since  dilTerent  ingre- 
dients of  the  combination  would  remain  unatTected,  and  bv  the  very 
nature  and  character  of  their  organization  would  be  able  to  continue 
the  wrongful  situation  which  it  is  our  duty  to  destroy.  Second. 
Because  the  methods  of  apparent  ownership  by  which  the  wrongful 
intent  was,  in  part,  carried  out  and  the  subtle  devices  which,  as 
we  have  seen,  were  re-orted  to  for  the  jjurpose  of  accomplishing 
the  wrong  conteni[)lated,  by  way  of  ownership  or  otherwise,  are 
of  such  a  character  that  ii  is  diCTicult  if  not  impossible  to  formulate 


Recent  Tkust  Decisions 


423 


i  remedy  which  rould  rL-t(i;v  in  ihi'ir  (.'nlircty  the  prior  lawful 
uiiulilion^.  Third.  Iieeiiu>e  tile  methods  devised  by  which  the 
various  essential  elements  to  the  successful  operation  of  the  tobacco 
liu.-iness  from  any  particuhir  a-pect  have  been  so  separated  under 
various  subordinate  combinations,  yet  so  unifi'jd  by  way  of  the 
Cdiitnil  worked  out  b\"  the  scheme  here  C(;ndennieil.  are  so  involved 
that  any  specific  form  of  relief  which  we  niij;ht  nou-  order  in  sub- 
stance and  elTect  might  operate  really  to  injure  the  public  and, 
it  may  be,  to  jierpetuate  the  wrong.  Doubtless  it  was  the  pr?sence 
ni  tlie>e  dilYiculties  which  causeil  the  United  States,  in  its  prayer 
fur  relief  to  tentatively  suggest  rather  than  to  specifically  demand 
lit  I'lnite  and  precise  remedies.  We  might  at  once  resort  to  one  or 
the  other  of  two  general  remedies — a  he  allowance  of  a  permanent 
i;:iutution  retraining  the  combin;'tion  as  a  universality  and  all 
\hv  individuals  and  corporations  which  form  a  part  of  or  cooperate 
in  it  in  any  manner  or  form  from  continuing  to  engage  in  interstali' 
(ommerce  until  the  illegal  situation  be  cured,  a  measure  of  relief 
V, h'(h  v.ould  accord  in  substantial  elTect  with  that  awarded  below 
t  ■  the  extent  that  the  court  found  illegal  combinations  to  exist; 
<•:■.  h.  to  direct  the  a;ipointment  of  a  receiver  to  take  charge  of  the 
■i-m!-  and  property  in  this  couiUry  of  the  combination  in  ail  its 
r,;iniritations  for  the  purjiost'  of  ])reventing  a  continued  violation 
"1  the  law,  anil  thus  working  out  b^-  a  s;ue  of  the  property  of  the 
ombination  or  otherwise,  a  condition  of  things  which  would  not 
be  repugnant  to  the  prohibitions  of  the  act.  But,  having  regard 
to  the  principles  which  we  have  said  must  control  our  action,  we 
do  not  think  we  can  now  direct  the  immediate  application  of  eithe;- 
(if  these  remedies.  We  so  consider  as  to  the  f'lr^t  bicause  in  view 
<M'  the  extent  of  the  combhiation,  the  vast  lieid  which  it  covers, 
the  all-embracing  character  of  its  activities  concerning  tobacco  and 
its  products,  to  at  once  stay  the  movement  in  inter^tate  commerce 
(if  the  products  which  the  coml»ination  or  its  co<"iperating  forces 
produce  or  control  might  inflict  infinite  injury  upon  the  public  by 
leading  to  a  stoppage  of  supply  and  a  great  enhancement  of  prices. 
The  second  l)ecause  the  extensive  power  which  would  result  from 
at  once  resorting  to  a  receivership  might  not  only  do  grievous  injury 
to  the  public,  but  tlso  cause  widesprea<l  and  perhaps  irreparable 
loss  to  many  innocent  people.  Under  these  circumstances,  taking 
into  mind  the  complexity  of  the  situation  in  all  of  its  aspects  and  giv- 
ing Weight  to  the  manv-sided  considerations  which  must  control  our 
judgment,  we  think,  so  far  as  the  permatajnt  relief  to  be  awarded  is 


424 


Industrial  Combinations  and  Tklsts 


ronccrned,  we  should  decree  as  follows:  ist.  That  the  combination 
in  and  of  itself,  as  well  as  each  and  all  of  the  elements  composinf;  it, 
whether  cor])orale  or  individual,  whether  considere<i  collectively 
or  senaratelv,  be  decreed  to  be  in  restraint  of  trade  and  an  attenijit 
to  monopolize  and  a  monopoli/.aiion  within  the  lirst  and  .-econd 
sections  of  the  Anti-tru^t  Act.  2d.  That  the  court  below,  in  order 
to  give  effective  force  to  our  decree  in  this  /t  j^ard,  be  directed  to 
hear  the  parties,  by  evidence  or  otherwise,  as  it  may  t>e  deenud 
proper,  for  the  i)urpose  of  a-^certaining  and  determining  upon  some 
plan  or  method  of  dissolving  the  combination  ;'ii(i  of  recreating,  out 
of  the  elements  now  composing  it.  a  new  condili'in  which  shall  bi' 
honestly  in  harmony  with  and  not  repugnant  to  me  law.  .;d.  That 
for  the  ;iccom])ii>liment  of  the-e  purjiose-.  taking  into  \iew  tln' 
diiBculty  of  the  situation,  a  j)eriod  of  >ix  month-  i-  allowed  from  tin- 
receipt  of  our  mandate,  with  lea\e,  however,  in  the  event,  in  the 
judgment  ot  the  court  below,  the  neces.^ivies  of  the  situation  require. 
to  extend  such  pi  riod  to  a  further  time  not  to  excied  sixty  day 
4th.  That  in  the  ever.t.  before  thr  expiration  of  the  ])eriod  thu> 
fixed,  :i  condition  of  disintegration  in  harmony  wi''  the  law  is  not 
brought  .ibout.  either  as  the  consequence  of  the  ac  1  of  the  court 
in  deter  .ining  an  i-^ue  on  the  -ubjct  or  in  accepting  a  plan  agn .  -' 
upon,  it  >h.dl  l)e  the  iluty  of  the  lourt.  ritluT  \>y  \\\<\  of  an  inj. 
tion  re-training  the  mo\ement  (jf  tile  product-  of  the  combinatKH' 
in  the  channel.-  of  inter-t.ite  or  foreign  commerce  or  by  the  appoint 
nient  of  a  receiv  er,  to  giw  effict  to  the  requirements  of  the  htatutt . 

KXIIIIUT    ,s 

DV  Ri.i.   \c,\iNST  tin;  ptnvDik  ((niniN  mion  ' 

Second. — /s  Ihf  fombination  'uhii  n  ;cc  //.:  (  Jiiioid  to  cxisl  one  th  t  is 
obnoxious  to  the  provisions  of  tin-  ciuii-irust  ad) 


The  recent  fleci-ion-  of  the  Supreme  Court  in  Standard  Oil  Co.  r 
United  State-,  and  .\mrrican   I'ohacco  Co.  r    Cnited  States,  niak^ 
it  (|uite  clear  tliat  the  language  of  the  anti-trust  act  is  not  to  red  i\ 
that    literal   con-truction   which   will   impair   ra'Jier   than   enh.uu> 

'(■;./'../  Stata  of  Amrrica  v,  /■."./.  Ji  I' out , if  .Witwiir^  f  Comp.iiiy  rl  ■ 
Opinion  of  the  Ciiiirl  a.ui  lnti.'rli>iulury  Dorcc,  In  the  circuit  (.'ourl  ot  tin 
United  Statfs  inr  the  l>i>iriii  ot  itcl.iware,  pp.  .^5-45-    Handed  down  Jiim-    ■. 
igii. 


f^;i: 


-^ 


Ri  (  EM  Trust  Df.cisions 


4-\' 


■;•<!  lom  <•■''  'nterstutc  commerce.  A^  we  read  those  decisions,  re- 
-:r:tir!t  of  interstate  trade  and  restraint  (jf  competition  in  interstate 
M\i(k  are  not  interchanc:eal)le  expressions.  There  may  he,  under  the 
.■'  !i-lrur-l  act,  restraint  of  competition  that  does  not  amount  to 
n-lraint  of  interstate  trade,  ju-t  as  before  the  passive  of  the  act 
i':t  rv  nii^ht  have  been  rc-traint  of  competition  tliat  did  not  amount 
;  I  a  .ommondaw  restraint  of  trade.  This  fact  was  plainly  recoj^- 
;,i  id  in  United  States  v.  Joint  Traffic  .\ssocia'.ion,  171  U.  .S.  505, 
:;()7,  where  Mr.  Ju-lice  I'lckham  said: 

"We  mi;iht  ;-ay  that,  the  formation  of  corporations  ftir  business  or 
manufacturing  puri)oses  has  in.\er,  to  our  knowledge,  been  regarded 
in  the  nature  of  a  contract  in  restraint  of  trade  or  conmurce.  The 
-anic  may  t)e  said  of  the  contract  of  j)artnership.  It  nu';,dit  also  l)e 
!  ;!i(  ult  to  ^hiiw  that  tlie  ap|)ointment  l)y  two  nr  iiiori'  producers  of 
;''!  -ame  ])iTson  to  sell  their  .goods  on  C(jmmis-ion  was  a  matter  in 
.:  \  (Ugree  in  restraint  of  trade.  We  are  not  aware  that  it  ha-  ever 
111  in  claimed  that  a  lease  or  purchase  by  a  farmer,  a  manaf.uturcr 
r  'iirrchant  of  an  additional  farm,  manufactory  or  shop,  or  the  witti- 
■  v\al  ironi  br  less  of  any  farmer,  merchant  or  manufacturer, 
•'   ir,iin((l  conuhtrce  or  trade  within  the  legal  definition  of  that 

While  all  this  is  true,  the  recent  decisions  of  the  SujirenH'  Court 
■    iKC  it  e(|ualiy  clear  that  .'  combination  cannot  escape  the  con- 

'■  ;iination  of  the  anti-tru<l  act  nvrely  1)\  the  form  it  a^<umi  -  or  by 
'!''  dress  it  wears.     It  matters  not  whether  the  combination  be  "in 

111'  lorm  of  a  tru>t  nr  otluTwi~e,"  whether  it  be  in  tht  form  of  a 
trade  association  or  a  corporat'in,  if  it  arbitrarily  uses  its  powi  r  to 
'■'■rfx'  weaker  comj)etitors  out  of  business  or  to  ciicrce  them  intu  a 

-lie  to  or  imion  with  the  combination,  it  puts  a  restraint  upon  intir- 
>tatc  commerce  and  monopoli/e>  or  attem[)ts  to  monopolize  a  part 

•f  that  commerce  in  a  sen.'-e  that  violates  the  anti-trust  act.  The 
^1  'ird  of  the  c.isi   now  before  us  --how-  tlial  from  1S72  to  1002,  a 

" ; !  'd  (if  thirty  \'cars.  the  |iur|io-e  of  the  trade  associations  had  been 
'  'I  'ininate  the  powder  .ind  e\plo-ives  trade  in  the  I'nited  States, 
!  ^  t.\ing  prices,  '-  '  .Hcording  tn  any  law  of  ^upjily  and  demand,  for 
du  V  arbitrarily  niud  the  output  of  eai  h  member,  iiut  according 
In  the  will  ol  i...'.r  managers.  It  ap|)ear>,  furthir,  that  although 
these  associations  were  not  always  strong  enough  to  ((intml  abso- 
lutrlv  the  prices  of  evplosives,  thi'ir  purpo-^e  to  ilo  -o  was  niAir 


''1!li 


'*il!f| 


lla 


ndoned.     I  ndir  thi-  last  of  the  tr.ide  a--o(iation  agreements 
Hie  d.ited  Jul\    1,  iS<;().  and  which  w.i'-  in  f'irce  until  June  30, 


426 


iNinsiRiAL  Combinations  and  Trusts 


ino4— the  control  uf  the  combinatiun  was  firmiT  than  it  had  l)eforc 
been.     Succeeding  the  death  of  Eugene  du  Pont  m  January,  i.,o:, 
and  the  advent  of  Thomas  Coleman  du  Pont  and  Pierre  S._du  I  <.nt. 
the  attempt  was  made  to  continue   the  re>tramt  ui^.n  mter-tale 
commerce  and  the  mont^pnly  then  rusting  l.y  ve.Un-,  ma  U-w  n,r- 
norations  the  title  to  the  a^^ets  of  all  the  corporation,,  alii  hated  with 
\]u-  trade  association,  tlien  di>solvinK  the  corpt.ratK.ns  whose  assets 
had  been  >..  ae.iuired,  and  binding  the  few  cor]).. rations  owning  the 
operating  p'ants  in  one  hsldinu'  company,  which  should  l)e  able  t.. 
,,rescribe  policies  a-d  cwntml   the  business  of  all   the  ^ubsiduine^ 
'without   the   uncertainties  attendant   upon   a   combination   in   th. 
nature  of  a  trade  a.^.Hiation.     That  attemi.t   re^uit.-d  m  compet. 
success.    Much  the  larger  part  ol  thr  trade  m  black  an<i  sm..k.U-> 
powder  and  dvnamite  ii^  the  Tnitrd  States  i.  lu.w  under  the  contn,l 
;,f  the  combination  M.ipport..l  by  the  2S  defendants  above  named. 
That  combination  i^  the  ^ucces^or  of  the  combination  m  eM>tena 
from  isoo  to  June  ^o.  1004.    It  i^  a  significant    act  that  the  trade 
association,  organized  under  tlie  agreement  of  July  1.  iS;,(.,  was  not 
di..„lved  until  June  .^o.  loo^.     It  ha-i  been  utili/e<l  unti    that  da  r 
bv  Thoma.  {•-Jeman  du  i^u■,t.  Pierre  S.  du  Pont  an.l  Altred  I.  du 
p'e.nt   in  Mip!>re-Mn-  .ompetitiou  and  thereby  building  up  a  ir...- 
nopolv.     Helwirn   Inbruarv,    u)02.  an.l  June.  1004,  the  combina- 
tion lia.l  been  >o  ompl'l'lv  transmuted  into  a  corporate  torm  thai 
the  trade  a-oeiation  ua^  no  longer  i.v>      .iry.     (  on.~e(|Ucni  .y,  t he 
trade  a^-oeiatioi,  w.i^  di^M.Ued  and  the  process  .,t  .Ii^m- ving  the 
con.orations  wh.-e  capital  >toek-  lia.l  been  aaiuired.  and  concen- 
trating their  phvMcal  a.>et>  in  one  great  corp..ration,  was  begun 
Mefore  the  j.lan  had  bee,,  fullv  carried  out  this  ,u.t  wa-^  commeno^.l. 
The  luonf.  satisfy  u-  thai  the  prc^nt  form  ol  the  combination  is  no 
le-  obnoxious  to'the  law  than  ua.  the  eombin.ilion  under  tlie  trade 
association  agreement,  which  was  <ii-olved  on  June  _^o.  1004-        ■'■ 
28  defendants  arc  associated  in  a  coml)ination  ulnch.  whether  tur 
individual  defendanf^  were  .luare  of  the  fact  or  not.  has  violat  |1 
and  Mill  pl.m^  to  '  iolate  both  section  i  and  MCium  :  of  the  anti- 
trust act.     We  conclude  that  it  i-  our  plain  duty  to  -rant  such  a 
decree  a>  uill  prevent  an.l  restrain  further  vi,.lat!ons  of  the  act 
Third.     /'//'   tl:inl  and  last  question  tlunfore  is,  idi<il  ^I'aU  /v  .«' 

naturr  I'f  llir  iltin,  '  ,,     r    1       if  ,,A 

It  mu-t  be  one  of  di-mi-,d  of  the  peiiijoii  a^  to  all  of  the  (lelni'i- 
ants  except  the  2S  who  are  found  to  be  inti  re-ted  in  ami  .uppnrter- 
of  (he  unlawful  loiubination. 


Receni"   Trlm    Decision's 


4-^7 


It  is  contended  by  counsel  for  the  delendant^  that  there  can  he 
iin  decree  a,t,Min~t  the  2S  defemiant^  for  the  reason  that  the  title  to 
tin  pmpirty  held  hy  the  defendant  corporations  cannot  be  impaircil 
hy  any  decree  of  this  Court.  "The  most  that  the  (iovernnient  in  any 
event  can  claim,"  say  the  counsel,  "is  that  prior  to  the  organization 
(if  the  present  delendant  comjianies  there  did  e.\i>t  contracts  and 
(iimbination>  in  re>traint  of  trade,  and  p(i»iblv  a  monopoly  of  the 
(\plosive  industry  in  the  United  States,  and  that  such  comi'inations 
,;ii(l  monopoly  wire  participated  in  by  some  of  the  corj)orations 
which  were  later  purchasid  by  the  present  defendants,  and  possibly 
ihat  ^(ime  ot  the  properties  tlial  were  owned  by  the  corporations 
that  were  purchased  by  the  present  defi'ndants  had  been  acquired 
ly  such  corporations  as  a  result  of  such  CDmbinations  and  mo- 
nii|)oly.  .  .  K\xn  so,  thi'  (nrporations  had  title  In  .-uch  pro[)erties, 
and  if  ^uch  combination^  and  monopolies  no  lon^nr  exist  the  title  to 
^uch  property  must  be  fjood  in  sul)Mr|uenl  purcha>ers  thereof." 
To  support  this  artjument  Brooks  v.  Martin,  j  Wall.  71,  and  other 
ca.ses,  are  refernd  to.  But  we  have  found  that  the  ct)rporatio!i; 
erfianized  after  the  advent  into  the  explosives  business  of  Thomas 
(.'okman  du  Pont  and  Pierre  S.  du  Pont  are  a  part  of  an  exi>ting 
oiiiibination  in  restraint  of  interstate  tr.'de.  The  du  Pont  Com- 
pany of  !i)0.'  co-op(  rated  with  the  ad\i>ory  and  r-pecial  conmiittees 
iif  the  trade  asxni.ition  from  .Vpril  2,  looj,  to  June  30,  UJ04,  in 
tixiiiK  price>,  api)ortionin<:  trade  amongst  the  members  of  the  a.>so- 
liation.  allowing  nbates,  and  forcing  competitors  to  submit  to  their 
rule.  The  du  Pont  Comp.my  of  kjo.;  was  created  to  aid  the  com- 
liination  in  concentrating  ii^  jiower  .ind  fastening  its  hold  on  the 
monopoly  which  it  had  Miiulously  bu;!l  up,  and  which  brought  to 
it-  members  in  the  short  periiKl  of  six  years,  the  enormous  ])rolit  of 
Sii,ooo,cc»  in  di\idend-  and  Si 2.000,000  or  Si,^,ooo,ooo  in  its 
suqilus account.  We  do  not  propo>e  by  our  decree  to  deal  with  titles 
to  property.  Our  power  is  ditined  in  the  fourth  section  of  the  anti- 
trust act.  That  section  invests  us  "with  jurisdiction  to  [)ri\(iit  and 
re-train  violations"  of  the  act.  The  same  section  provide-  tluit  the 
[K'tition  may  contain  a  iiraytr  that  the  \iolation  of  law  tlnrein 
allcRed  "shall  be  enjoined  or  otherwi-e  pirohil  ited."  It  i- our  pur 
|xise,  us  it  is  our  duty,  to  exert  ihe  power  thus  conferred  on  us  to  the 
I'xtcnt  ni'Ccss;T\-  to  "prevent  and  restrain"  furtlur  vioL.tions  of  the 
aft.  In  i)llier  words,  the  relief  we  can  givi'  in  thi-  |>ro(ceding  is 
preventive  aiul  iiijuncti\e  only.  If  our  decree,  limiti'd  to  that  pur- 
P^'H',  shall  necessitate  a  discontniuaiKi'  of  j)re-(iil  bu.-iness  methiKls, 


420 


InDUSTKIAI,    CoMniNATlOXS    AN!)    TrVSTS 


it  is  only  bccaiise  those  methods  are  illegal.  The  incidental  re-ults 
uf  a  sweeping  injunction  may  be  serious  to  the  jjarties  mimedialely 
concerned,  but,  in  carrying  out  the  command  of  the  ^tatute,  which 
is  as  obHgatory  upon  this  court  as  it  i>  upon  the  i)arties  to  tliis  suit, 
such  results  should  not  stay  our  hand;  they  should  only  challenge 
our  care  that  (;ur  decree  be  no  more  drasiic  than  the  fact-  of  the  ca>e 
and  the  law  demand. 

The  dissolution  of  mure  than  sixty  cori)oralion>  smce  the  adveiU 
of  the  new  management  in  looJ.and'  thect)n,^ef|Ut.at  impossibility  ol 
re-toring  original  ciulilions  in  the  e\plo-i\es  trade,  narrows  the 
Iield  of  oper.rii'.n  uf  aiiv  decree  we  may  make.  It  >houl(l  not  make 
the  decree  anv  the  ier-/etTecti\e.  however.  In  the  Standard  Oil  ca,-. 
Mr.  diief  Justice  White  slid: 

•■  U  may  be  ci.nceded  that  ordinanly  where  it  wa>  found  tluit  au> 
had  been  done  in  violation  of  the  statute,  adeciuate  measure  of  rditl 
would  result  from  re>training-lhe  doing  nf  such  actr-  in  the  fuluri 
Sulfi  V.  United  States,  luo  U.  S.  S7,v  But  in  a  case  like  this,  where 
the  o.nditi  m  which  ha.>  been  brought  abuut  m  violation  ol  the 
-tatute,  in  and  of  itsi'lf.  is  not  only  a  continued  attemiit  'o  nio- 
nopoli/.e  but  also  a  munopoli/,ati<«n,  the  duly  to  enlorce  the  Matute 
requires  the  application  of  broader  and  ni^re  runtrolhng  remedu-. 
\-  i)enaltie'^  which  are  not  authorized  by  law  may  n^t  be  intlicted  by 
judicial  authoiitv.  it  fnllow-;  that  to  meet  the  situation  with  which 
we  are  confmntJd  the  application  of  remedies  twu-lnld  m  charaeur 
l)ecomes  e--(iitial,  iM,  In  l.-rbid  ihv  duing  in  the  future  ..f  act^  like 
those  which  \se  have  found  to  liave  been  done  in  the  past  which  w.iuld 
be  violative  of  the  statute;  :nd.  the  ixertion  of  such  mea.-ure  of  relie! 
•IS  will  cffecluallv  di-oKe  th.  combination  found  to  e.\i-t  in  viola- 
'ti„n  of  the  statute,  and  thu^  neutrali/e  the  ext.nMon  and  continu- 
.A\\  operating  force  which  the  posse>-ion  of  the  \)r.\ur  unlawfully 
,,bi,iiiu(l  'las  brought  and  will  continue  to  brim:  about.  " 

Both  of  these  remedies  are  as  clearly  demanded  in  the  present  (i-e 
as  th-v  wrre  in  llie  Standard  Oil  ca^e.  The  existinR  combmatioii  m 
the  explosives  trade  is  one  in  restraint  of  inter-tate  commerce  ll> 
-ales  board  tixe-  prices  and  exercises  jiiAvers  whiih  Mr.  Ha.>kell.  it- 
chairman.  a.!mit>  are  even  more  extended  in  their  scoi)e  than  wen: 
the  pow<T<  of  tlv  uKisnrv  and  special  committees  which  the  sak- 
bo.ird  Mi!)erseded  mi  lune  ^o.  um.  after  co-operating  with  them 
from  lulv,  loov  It  has  also  attempte.i  to  monoi^oh/e  and  i<  -it- 
lemplni"'  to  monopoli/e,  and  ha-  nmnoi.nli/.ed  and  is  now  in  Hh 
jKXstsMon  of  a  mon  .Dolv  of.  a  larg.   p.irt  of  the  explosives  trade  in 


Recent  Tkust  Divisions 


429 


the  United  States.  Our  decree  niu>t  therefore  l,e  one  which  will 
iorhid  future  acts  violative  of  the  law  and  comi'tl  a  dissolution  of 
the  combination  existing;  in  violation  of  the  law.  'l\>  vt,,p  tlu-  hu-i- 
iH>s  of  the  combination  immediately.  howcMr,  niii'ht  he  atteiidid 
with  very  disastrou-^  conse(]uences.  ']he  defendants,  or  some  of 
ihtin,  for  example,  furnish  military  and  ordinance  i-owders  to  tlie 
United  States  CjovernnieiU.  We  understand,  also,  that  they  fur- 
nish explosives  used  in  the  construction  of  Mu'  i'anania  ("anal. 
Tlirir  al)ility  to  continue  so  to  do  ^-hould  not  he  destroyid  hefore  the 
i\|)ir,ition  of  a  re.asonahk-  time  for  adju^tin^  their  hu>iness  to  the 
changed  conditions.  In  the  Standard  Oil  and  .American  Tobacco 
cases  six  months  \\ere  allowerl  for  making  the  changes  necessit;;ted 
by  the  decrees  entered  therein.  What  time  should  be  allowed  in  the 
case  now  ir  hand,  and  what  other  detail-  >hould  he  embodiul  in  the 
fir;al  decree,  we  cannot  now  determine.  Thi'  present  decrer  will 
thtret'ore  be  interlncutory.  It  will  adjudge  that  the  js  dtfendants 
are  maintaining  a  combination  in  restraint  of  inter>tate  commerce 
in  powdiT  and  other  e\plo-ii\-es  in  \-iolation  r.f  section  i  of  the  anti- 
trust act,  that  Ihev  have  attemi)te(i  to  monopolize  and  luut  mo- 
n.ipoli/ed  a  part  of  ^ ;:ch  commerce  in  violation  of  section  2  of  that 
;',rt.  that  they  shall  be  enjoined  from  continuing  said  combination, 
and  that  the  coml  ination  ^ha!l  be  di'^xilvid 


K.xiiinii   4 

PKCRI  r.    .\G.\INST    Tin:    STXNDAK!)    SAMIARV     M  AMI  \rT''RINC. 

('()MPAN^■  ' 

The  ware  is  absohitel\  unp.ittiUed.  .\nyonc  may  sell  it  as  freely 
lie  may  a  loaf  of  bre.id.     \o  one  can  till  1  y  looking  at  a  bathtub 

'v.ther  cnamelrd  pnwdir  h.a-  been  >prinkled  upon  it  by  a  patent 
'iredger  any  more  than  anyone  who  eats  a  loaf  "f  brcid  can  tell 
■-'liithtr  it  has  been  h.ikcd  in  an  oven  with  a  patented  gr.ite,  or  who 
lighl>  a  kerosene  lamp  can  tell  whether,  in  the  process  of  refining,  a 
liatenttd  tool  has  been  used,  or  by  taking  a  pinch  of  ^iiutT  (an  be 
^ure  that  there  was  or  not  a  patented  mill  used  in  grinding  the 
tobacco. 

I'lilrd  Staler  nf  Amrrica  v.   1  hf  Statidiird  S.iiiiliry  Manufacturing  Com- 

■   .     Opinion  of  ilu-  l'i)urt  on  lin.il  lIi.irinK.  In  the  I'inuit  Cimrt  of  thr 

InlinlMatesforthi-  Di.'^triit  ot  .NLiryiand.  |i|>.  .^.5-^7.    Hanticildt   vn.Oct.  13th, 

11)11      For  a  liri<'f  history  of   the   liathtuh  >  omhin.ilion  see  Stevens,  W.  S., 

(»>':irirrl\  Journal  of  Kconomics,  .\ugust.  iiji-',  \'')l.  .\X\  I.  pp    viUT. 


'I 


ii 


460 


IsurSTRIAI.    C'OMIUNATI(-)NS    AND     riUSTS 


If  asrecnuTit^  in  this  ca.~f  arv  nol  violation-  of  the  SluTiiuin  Att. 
similar  auKrm(.nl>  anions  all  thf  baker-;  of  hicad,  the  rrtimT>  ..f 
petroleum,  the  ^'tinders  of  snuff  will  be  le,i:;al,  pro",  ided  that  some- 
where in  the  process  of  making  the  bread,  retminf^  the  petroleum, 
or  ^rindinj:;  the  snuff  a  ]->atented  tool  has  been  used. 

The  issue  is  important.  It  euts  deep.  The  record  stiuarely  jire- 
sents  it.     It  must  be  passed  upon. 

The  defendants  say  they  have  broken  no  law  even  if  all  that  ha- 
thus  far  been  said  herein  be  true. 

They  rely  upon  what  they  understand  to  have  been  decided  l.y 
the  Circuit  Court  of  /^pi)ea!s  of  the  Seventh  Circuit  in  the  case  of  th'j 
Ruhlu-r  Tire  Wheel  Co.  v.  Milu\uikee  R.  W.  Co.  (154  I'""-'*''  .vv"^)- 

The.e  the  court  said  that  no  one  can  use  a  patented  article  with- 
out the  consent  of  tlie  patentee.  Hi'  may  l"i.<  his  own  condition-.  l! 
adds,  "Whatever  the  terms  the  courts  will  enforce  thim,  iirovidnl 
only  that  the  licensee  is  not  thereby  required  to  violate  some  law 
out'side  of  the  jiatent  laws,  like  the  d'oin^  of  murder  or  arson." 


.\t  common  law  and  by  statute  monoi)olies  are  unlawful.  At 
common  law  and  by  statute  a'  man  who  invented  a  new  and  useful 
thin«  mii.;ht  be  j.;iven  a  ri,L,'ht  wliii  h  would  enable  him  for  a  Imiitol 
tinu^elTectuallv  to  monol)oli/e  it.  The  courts  have  said  that  thi- 
rjc'lit  to  mon.ipoli/e  what  lie  invented  can  not  be  taken  trom  .1 
patentee  bv  State  l.iw-.  'I'liey  say  it  has  not  been  taken  away  by 
(■(.nj^ress.  'AU  men  know  that  Confjress  never  intended,  when  it 
passed  the  Sherman  Act .  i>^  change  the  patent  law.  It  did  not  do  -. 
The  patentee  ma.v,  in  -inte  of  tli.it  law.  monoi)oli/,e  for  the  Urm  «] 
hi-  iKitent  tiv  th'int:  which  he  or  his  a-iunior  in\ented.  \eitlier  at 
common  law  nor  in  this  country  by  statute  has  he  ever  had  a  ri'.'ht 
to  m  >noi)oli/e  anything  el-e.  .\-  to  everything  not  validly  claimcl 
in  hi-  patent  he  is  as  other  n'cn.  If  by  the  common  law  or  the  stal 
lites  of  the  State  or  bv  the  ■  uactments  of  Coii,uie-s  men  are  lorbul- 
den  to  re-train  tnide'or  to  monopolize  it,  a  patditee  may  not  r. 
strain  trade  or  attt'iupt  to  moiiopoli/e  it  in  anytliin.i^  except  that 
which  is  covered  bv  hi-  patent. 

A  pati'iit  i-  a  u'rant  oi  a  ri^ht  to  evclude  all  others  from  makine, 
u-inu.  or  sellini;  the  invintion  covered  by  it.  It  does  not  «ive  ' 
ri^hl  to  the  it.itcntee  to  sell  indulgences  to  vi-late  the  law  of  tbr 
land,  be  it   the  Sherm.m  Act  or  another. 

The  rii^ht  to  e\(  hide  other-  i-  the  jiropertv  t«f  the  patentee.     It  1- 


RiiciiM  Trust  Decision's 


431 


his  very  own.  lie  may  (io  with  it  a-  he  will.  .\  very  rich  man  may 
liave  Sioo, 000,000  ol  cash.  It  is  hi-  pruiierty.  It  i's  his  very  nwn. 
ii.  inay  do  with  it  as  he  will.  Neither  one  of  iheni  can  u>e  his 
jiroijerty  t()  brin;,'  about  a  violation  of  law.  .A  i)atentee  who  monop- 
olizes hi-  invention  breaks  no  law.  He  who  uses  !  is  projjertv 
rii^'ht  to  exclude  others  from  the  making;,  selling,  or  usin;,'  his  in\en- 
unn  for  the  purpose  and  with  the  etlet '  f  niaking  a  combination  to 
ii -train  trade  in  something,'  from  which  his  patent  cives  iiim  110 
r-lit  to  exclude  others,  doe-  break  the  law.  He  breaks  it  precisely 
.i-  the  individual  defendants  in  the  Standard  Oil  and  .American 
Tobacco  Cos.  broke  it.  They  had  the  same  rij^dit  to  u>e  their  brains, 
their  capital,  and  their  credit  as  they  thou^dit  best,  as  he  had  t.) 
U:-c  his  ri,i;hl  to  exclude  all  others  from  making,  u.-imj.  or  .-ellini; 
automatic  dredj:;ers.  Pie  was  subj''ct  to  the  -ame  limitation-  as 
ihty  were.  They  could  not  lawfully  use  their  brain-,  thiir  money, 
and  their  credit  to  restrain  trade  in  petroleum  and  tobacco.  He  can 
not  use  his  jwlent  rights  to  restrain  trade  in  unpatented  bathtubs, 
i'he  defeniiants  have  pressed  upon  our  attention  many  cases  in 
till  Cirtuit  Courts  and  in  the  Circuit  Courts  of  .\p[)eal.  Many  of 
U'ani  have  Ujjheld  thi>  ri^'ht  cf  a  patentee  to  t'lx  the  price  beK)W  which 
a  purchaser  from  im  of  jiatented  articK-  ma\-  not  ^.ell  those  articles. 
ill  -onii'  (if  these  case-  it  has  be(  1  held  that  one  who  sells  at  a  lower 
price  thereby  becomes  an  infringer  and  that  the  Tederal  Courts 
have  jurisdit  tion  of  a  -uit  brouLrht  a^ain-t  him  on  account  of  such 
.>ale.  irre-pective  of  the  amount  in  controversy  or  I'e  citi/,enshii) 
of  the  parties. 


'I  he  .Sui)renie  Court  has  in  .several  recent  cases  expressly  said 
that  it  wa-  not  be  to  understood  as  exi)ressinf,'  any  oj)inion  as  to 
whether  >ueh  restrictions  when  ajjplied  to  patenttd  articles  were 
or  Were  not  \-alid 


Wayman  did  not  -ell  jjatented  dred).,'ers  on  conch'tion  that  the 
imrchasers  should  not  resell  them  below  a  tixed  prici'.  The  (juestion 
i>l  whether  such  restriction-  upon  the  sale  of  |)atenteil  articles  are 
valid  is  not  i)efi)rt'  us.  We  neither  decide  it  nor  intimate  any  opin- 
ion ufH)n  it. 


Ai2 


IXDUSTRIAL    rOMBIXAllO.VS    AND    TRUSTS 


What  has  been  said  is  sufficient  for  the  determination  of  thi. 
case.  The  ware  is  not  patented.  The  agreements  ^r  licenses  at- 
tempt to  fix  the  price  of  unpatented  ware  and  to  monopoUze  tlie 
trade  in  it.  The  fact  that  Wayman  had  a  patent  on  something; 
else,  even  thoupTh  it  was  a  tool  used  in  one  step  of  the  making  of  thr 
ware,  gives  neither  him  nor  his  licensees  the  right  to  restrain  inter- 
state trade  in  the  ware.  The  owner>hip  of  a  patent  for  a  tool  iiy 
which  old,  well-known,  and  unpatented  articles  of  general  use  can 
be  more  cheaply  made  gives  no  right  to  combine  the  makers  and 
dealers  in  the  unpatented  articles  in  an  agreemei.  to  make  the 
public   pay   more   for   it. 


In  what  has  been  said  it  has  been  assumed  that  Wayman  was  the 
real  and  substantial  owner  of  the  pii  tents;  that  the  scheme  was  his; 
that  his  purpose  wms  merely  to  make  money  for  himself  by  selliiii,' 
to  the  corporate  defendant-;  indulgences  to  sin  against  the  Sherman 
Act. 

The  Government  contends  that  this  was  not  the  real  situation. 
In  its  view  there  is  nothing  before  the  court  e.xcepl  an  ordinary 
combination  to  raise  and  maintain  wholesale  and  retail  prices  and 
to  force  all  the  makers  and  dealers  in  the  country  into  it.  Wayman, 
it  says,  was  nothing  more  than  the  ordinary  promoter.  The  i)at- 
ents  servt'd  the  jiurpose  of  the  certificate  of  inct)rporation  from  New 
Jer-ey  or  Delaware  used  when  the  combination  became  a  consoli- 
dation. We  have  not  discu>^ed  this  branch  of  the  case.  We  will 
not.  We  refrain  from  doing  so  not  l)ecause  it  would  not  be  i)erti- 
nent.  It  would.  Ordinarily  it  would  receive  full  consideration. 
Unus'Uil  circumstances  shown  l:y  the  rec<jrd  make  it  inexjjedient 
and  even  improper  to  do  so  if  the  case  can  be  disposed  of  without 
commenting  upon  that  aspect  of  it. 


.  .  .  .\gain-t  the  <)ther  ilefendants,  cor[)orate  and  individual,  the 
Government  i->  entitled  to  injunctixe  relief  substantially  as  prayed 
for.  In  vii'W  u\  tiie  i)endeiuy  of  the  crinn'nal  case  all  characteri/.a- 
tion  of  what  the  defendants  have  done  not  necessary  to  the  effective- 
ness of  the  decree  .--ho'.ild  beoniitti<l  from  it.  The  Government  may 
submit  a  draft  of  a  decree  lo  thi  eoun.-«el  for  the  defendants.  If  -in 
agreement  can  not  be  speedily  had  we  will  upon  application  fiN  an 
earlv  dav   for  it>   settlement. 


Recent  Trusi  Decisions  433 


Exhibit  5 

DECREE  OF  IN'JUNCTION  ACiAINSr  THE  SOCTIIERN  WHOLESALE 
GROCERS  ASSOC  lAlTDN'  ' 

I    That  the  said  defendants,   The  Southern  Wholesale  Grocers" 
A- .icialion  and  all  thi'  memljers  of  said  association,  The  Southern 
Wholesale   (Jrocers"    Ass(,ciation,   a    corporation.    The    .McLe.-ter 
\,ui   Hoose  (:"()nii)any,  J,imes  A.  \an    Hoo-^e,   Rotjert    McLester, 
Till-    Alabama   Grocery   Company,   S.   W.    i.ee.   Joseph    II.    Mc- 
L..urin.  L.  M.  Ilooiier,  F.  E.  Ilashaj^en,  C.  VV.  Barlleson,  Robert 
.\h">re,  Thomas  C.  Davis,  R.  B.  Earn-haw.  C.  C.  Guest,  T.  H.  Seo- 
wli,  W.  T.  Reeves,  R.  A.  .Morrow,  J.  H.  C.  \Vult)urn,  J.  I).  Faucette, 
\V.  A.  Scott,  and  Jarno  W.  Lee,  and  each  and  all  of  th;m,  their 
directors,  oOkers,  a;-ents,  servant-,  and  em])loyees,  and  al!  person.-, 
actin;,'  under,  throuj^di,  by,  or  in  behalf  of  them'or  either  of  them,  or 
rliiniin,!,'  so  to  act  be,  and  they  are  hereby,  perpetually  enjoined, 
ri, -I rained,  and  prohibited  imm  comijinint;,  con.-^pirin;,',  confedcrat- 
ip,-.  or  aRreeinjT  to^'ether  or  with  others  expressly  or  impliedly, 
directly  or  indirectly,  to  prevent  m.mufaclurers  or  producers  en 
eaired  in  >ellinfj;  or  sliippin,!.,'  commodities  anion-,'  the  several  Stato 
y.A  in  the  District  of  Columl)ia  from  sellinsj;  such  commodities  to 
any  person  \yho  is  not  a  member  of  the  said  The  Southern  Whole- 
sale Grocers'  A>-.-ociation.  or  who  i.-.  not  listed  on  the  so-called 
Green  Book,  publishid  by  b>aid  association,  its  officers,  and  aj;ents, 
ami  entitled  '•OfTicial  List  of  Whole.sde  Grocers  in  the  States  of 
ALihama,  Arkan.-^as,  District  of  Columbia,  Florida,  Georgia,  Indian 
Tin'iory,    Louisiana,    Maryland,    Mississippi,    .\orth    Carolina. 
Or.lahoma,  South  Carolina,  Tennessee,  Te.xas,  and  \'irf^inia,"  ur 
any  b(M)k,  pamphlet  or  li-t  of  like  character;  and  thev  and  each  of 
ihfin  be,  and  are  likewise  enjoined,  restrained,  and  prohibited  from 
puhlishinK,  causinj^  to  be  published,  aidin.!,',  assistin;j;,  or  encourag- 
ing' the  publication,  distriliution,  or  circulation  of  any  book,  pam- 
phlet, or  list  wherein  is  contained  only  the  names  of  wholesaU' 
Rrocers  located  in  the  territt)ry  embraced  by  said  organization  who 
have  announced  their  intention  or  agreed,  directly  or  indirectly, 
expressly  or  impliedly,  to  work  in  harmony  with  said  association. 

rhe_\  are  also  enjoined,  re-trained,  and  nroliibitcd  fr.mi  publi.'-h- 

^I'nited  Stilted  cf  Amcrtrii  v.  Tlir  Soulhrrn  Wholesale  Grortrx  Association 
el  at  DoiTCH-  ni  InjuruTion,  In  the  Cir  uit  Court  of  the  United  States  for  the 
N'urilurn  Distrii  t  nf  Alabama,  pp.  4-g.    Handed  down  October  ijlh.  i.yi  i. 


434  Industriai.  Combinations  and  TursTS 

in.'  or  <li>trihutinu.  or  cauMi^  to  l.f  puMi-hrd  or  <listribuU'(l  or 
aidin"  or  a^-i^lin?  or  encoura,^iii^  in  the  puhhcation  or  di>lnbution 
of  -mv  \\<  or  li^t>  of  manufacturers  or  producers  who  have,  w- 
nressl'v  or  imi)licdlv.  dircctiv  or  indirectly,  agreed  to  sei!  only  to 
members  .,f  said  a;>ociation,  or  to  persons,  firms,  or  corporations 
:d  in  said   Green   Book,  or  book,   pamphlet,   or   li>t   oi   liki- 

'^T^That  the  said  defen<l:mt>  an.l  each  aii<l  all  of  them,  their 
directors,  <;tTicers.  agents,  servants  and  employee^,  and  all  person^ 
acting  under,  throu-h,  bv.  or  in  behalf  ui  them,  or  .  :ther  ot  them. 
„r  claimin-'  to  <o  act,  be.  and  thev  are  hereby,  enjomed.  re>trainc<, 
and    prohibited    from    combining',   con>i)inn,-,    confe.leratinu,   and 
a-reein-  together  or  with  others  to  fix  a  price  at  which  any  om- 
inodity  4iall  be  sold,  ..r  to  coerce  manufacturers  and  prodncers  en- 
gaged in  selling  and  shipi'ing  commodities  among  the  sev  -al  Mates 
and  in  the  Di>trict  of  Columbia,  to  fix  a  limited  selling  price  at 
which  such  commo<litie-  are  to  be  ^oM,  and  t.>  have  SuCh  pnc- 
printed  on  cards  and  di-tributed;  and  they  are  hereby  enjomed, 
restrained,  an<l  prohibited   from  i.rinting,  ca  ;sing  to  be  printed, 
or  encouraging  or  aiding  in  the  printing  of  such  canls,  or  th.  ;r  dis- 
tribution; and  thev  and  each  of  them  are  likewise  enjoined,  re- 
strained and  prohibited  from  conspiring,  confe.leralmg,  oj  agreeing 
to>rether  or  with  others,  expre^^ly  . ,r  implie.Uy.  directly  or  ind.rectK, 
to"prevent  such  manufacturer,  and  pnulucers  fmrn   selling  and 
shii  ping  commo<litie>  to  any  wholesale  grocer  who  doe.._  ..t  main- 
taili  the  price  so  fixed  and  listed;  and  they  and  each  ol  them  are 
likewise  enjoined,  restraine.i,  and  prohibite.l  trom  clemandirg  and 
receiving  from  any  such  manufacturer  or  producer  any  rebate 
bonus,  or  emolument  of  any  kind  to  be  ,.a,d  to  any  wholesale  d  ale 
or  iobi,er  for  ;ind  on  accumt  of  the  fact  that  he  has  maintained  the 
limited  selling  price;  and  are  likewise  enjomed,  restrained    and 
prohibited  from  i-aying  or  delivering  any  such  rebate,  bonus,  or 

emolument  of  any  kind,  directly-r  l"*^'-^-^^\>  V*^;'"r'jS;  S" 
<.  lie  grocer  or  jobber  who  has  maintained  such  limited  selling  pr  ce, 
or  demanding  or  receiving  any  fine  or  penalty,  directly  or  indirectly 
from  anv  whole-ale  grocer  or  jobber  engaged  in  commerce  among 
the  several  States  and  in  th.  District  of  Columbia  for  and  on  ac- 
count of  such  wholesale  grocer  or  jobber  not  having  maintained 

said  limited  selling  price.  ,    „    r  .i,  i,  ir  .lin.rmr^ 

,    That  said  defendants  and  each  and  all  of  then,,    heir  directors 

officers,  agents,  servants,  and  employees,  and  a'    i.ersons  acting 


Recknt  Trust  Dfx  i  'ons 


435 


under,  through,  by.  or  in  behalf  <  1  tlum,  or  (.'ilher  of  ihem,  or  claim- 
iim  M)  to  act,  !)(.',  and  tluy  are  lurthy,  j)en)etually  cnjoimd.  re- 
>traiiicd,  and  iJrohibited  from  con>i)irinji,  (onfedcratinf;,  or  a^rc'cing 
tdKithcr  or  with  other-,  expre>  ly  or  in'ipiiedly,  .iirectly  or  indi- 
rectly, to  boycott  any  manufacturer  or  producer,  v  liolesaler,  or 
iiilil)'er  enfja^ed  in  commerce  arnon^  the  -everal  States  and  in  the 
District  of  Columbia  for  and  on  account  (.f  any  sui  h  manufacturer, 
producer,  wholt.-aler  or  jobber  haviim  sold  or  tran^i^ort^d  in  inter- 
state commerce  any  commodity  to  an\-  per-on,  lirm,  or  cmporation 
,vho  is  not  a  member  of  said  association  or  who  does  not  maintain  the 
Slid  limited  sell'n.u'  I)rice  or  who  i-  not  listed  in  the  said  Cireen  Book 
..r  hook,  pamjihlet,  or  li>t  of  like  character;  and  al>o  from  combining. 
(.  nspirinp,  confederatin-,',  and  agreeing  together,  or  with  others, 
cxpres-ly  or  impliedly,  directly  or  indir.  ctl_\  to  prevent  any  person, 
t';rm,  or  corporation' who  refu'^rs  to  join  said  association  or  who 
refuses  to  maintain  -aid  limit ed  selling  i)rice  or  who  sells  com- 
modities direct  to  tlu  consumer  troni  purchasing  such  commodities 
from  manufacturer-,  iobbers,  producers,  or  wholesalers  engaged  in 
uiinnierce  among  the  -everal  State-  >nd  in  the  District  of  Columbia; 
and  also  from  conspiring,  confederating,  and  agreeing  togethir  or 
with  others,  exl^res^ly  or  impliedly,  directly  or  indirectly,  to  increase 
jobbers'  profit  >  by  increasing  prues  at  which  wholesalers  and  jobbers 
shall  -ell  any  commodity  in  interstate  commerce. 

4.  That  said  defendants  .:nd  each  and  all  of  them,  their  directors, 
ofTiccrs,  agents  ser\-ants,  ,ind  emiiloyci  -,  and  all  person^  acting 
under,  through,  bv.  or  in  behalf  of  th(  m,  or  either  of  them,  or  claim- 
ing so  to  act,  be',  and  they  are  hereby,  perpetually  enjoined,  re- 
strained, anci  prohibits  i  fr'om  consjiiring  or  agreeing  tog  ther  or 
with  others,  expresslv  or  in'iliedly,  to  do  or  to  refrain  Iromdomg 
.anything  tlu  purpi»'e  or  ei  ct  of  which  is  to  fix  or  maintain  the 
price  at  which  any  commodity  employed  or  intended  to  be  employed 
in  rommerce  among  the  several  States  and  in  the  Ih-trict  of  Co- 
luml)ia  shall  or  should  be  sold  by  any  manufacturer,  jobber,  whole- 
saler, or  retailer,  .  r  the  purpose  or  etTcct  ..f  which  is  to  hinder  or 
prevent,  by  intimidation  or  coercion,  any  person,  firm,  or  coqwra- 
tion  from  buying  or  selling  any  such  commcxlity  wherever,  when- 
(\vr,  from  and  to  whomsoever  and  at  whatsoever  price  may  be  then 
,inil  there  agreed  upon  bv  tne  -eller  and  purchaser. 

V  The  Southern  Who!--ale  Grocers'  .\ssociation.  its  otTicer-  and 
—  1,,  r^.  and  ai:  who  shall  hereafter  become  ofTicers  and  mei.ibers 
association,  are  hereby  peqietually  enjoined  and  inhibited 


•li: 

\ 

u^ 

! 

*!!! 

I 

•  -fc 

■  SI' 

r 

5  If 

t 

r 

i|s 

*i 

' 

f! 

V 

.■t ' 

t 

^ 

-aiU 


43f) 


InDT'STRIAI.    ("OMBIWriONS    AM)    TlUTSTS 


from  (loiii^,  iir  (.mihining  or  lon^piriiiii  to  (Id,  either  or  any  of  said 
acts.  '1"1r'  -.lid  a--iiciation  and  its  (.rii(i-T-~  and  inL'nil)LTs  arc  not 
rcstraiiu'd  froi'i  maintaining'  said  orizanizaliun  for  social  or  other 
j)ur[)osis  tliaii  those  herein  prohibited. 


F.xniHiT  6. 

DECRF.r;  XCAIXST  TIIK  (.i;.M.R.\L  I.LFCTRIC  COMPANY.' 
Second:  That  the  Cleneral  F.iectric  ("ompanv  is  thi'  owner  of  the 
entire  capita!  sttx.k  of  the  National  lllectrit  Lani])  Coniparu',  ar;d, 
at  the  time  of  the  tiling  of  the  petit iiui  herein,  was  the  owner  of  the 
majority  of  said  stock;  that  the  -aid  National  Flectric  Lamp  Com- 
pany is  in  turn  the  owner  cjf  the  entire  capital  stock  of  the  sui)sidiary 
companies  htreinafter  named;  that  such  stock  ownership  has  been 
concealed  from  the  "general  public  and  the  trade;  that  notwith- 
stanclin.t;  such  stock  ownen-hij)  the  Cieneral  F.iectric  Company,  the 
National  Flectric  Lamp  Comi)any,  and  the  Iatler"s  sulisidiarv 
companies  hereinafter  uanied,  are  pretendini^  to  be  se[iaratc,  di-- 
tinci,  independent  ai',d  C(ini])etin,i:;  companie-,  in  the  business  oi 
manufacturing,  lealir.'.;  in  and  sellini;  incandescent  electric  lamp-. 
whereas  no  such  independence  or  comjHlition  exists  or  ha.s  existed, 
and  th;;t  the  Cenend  Flectric  Company  has  heretofore  been  largelv 
cnsjaired  in  carryin;,'  on  the  incandescent  lamp  business  indirectly 
throufih  -aid  companie-. 

It  is,  therefore,  adju(!,':;ed,  ordered  and  decreed,  that  the  defend- 
ants. National  Flectric  L;imp  Company  and  all  its  subsidiar}-  com- 

I"inies be  each  and  all  of  them  dissoKed,  and  the 

(icneral  IJeclric  Company  is  enjoined  from  hereafter  conducting, 
except  in  its  own  name,  the  business  heretofore  or  hereafter  cxirricd 
on  by  it  in  incandescent  lamps  of  any  and  every  description;  and 
It  i>  further  adjudc;ed,  ordered  and  decreed  that  all  factories, 
plants,  and  manufacturin.t;  and  sellin<;  dejmrtments  operated  or 
(Avned  by  said  (ieneral  Flectric  Company,  for  the  manufacture  and 
sale  of  incande-cent  lamjis,  shall  lie  made  known  to  the  f^cncra! 
'-liilic  and  trade  as  the  property  and  business  of  the  said  General 
Flectric    Company; 

'  I'nitiil  Sliilr:  .j  America  wGntiral  EUclric  Company  d  al.  Final  Dcrrce, 
Im  the  Circuit  Court  of  the  United  States  for  the  Xorthcm  District  of  Ohio, 
Kastern  Division,  pp.  .<-io.  Handed  down  Ort.  i3.  iqii.  For  a  brief  history 
of  the  Fleetric  Lami)  (ombinatiu!  see  Ste\eii-,  \V.  S.,  Quarterly  Journal  of 
ludiiomics,  .\ugust  191.',  \ol.  XWI,  pp.  SQitf- 


UiXKNi     IkUST    DlA  l^IONS 


437 


Third:  That  the  CciuTal  Klcctrir  Coirpany  an(l  .  udi  and  all  of 
the  Lamp  .Manulaclurin^  !).  uiulaiil>  ;i~  dciimti  in  ciau.M'  tourth, 
thuir  ortkcTS,  atrcnls  and  st.T\aiU<  l)f  and  tiiey  luri'by  aiv  rolraiiU'd, 
enjoined  and  f<)rl)id(kn  from  making  or  carrying  out  direelly  or 
imlireetlv,  any  contracts  with  any  niannlacturer  or  manuladurers  of 
lamp-making'  machiner\ ,  or  wi'ih  an\  manufacturer  or  manufac- 
turers of  hull,-  a;id  lu!);ii:;  for  incandev,  ^nt  1  mps,  whereby  -uch 
r.anulaeturer-  or  anv  of  tlum  hall  he  hound  not  to  >ell  the  ^oods. 
manufactured  1  \-  ih'eai,  r(-i)ecd\ely,  to  othei-  than  the  -aid  de- 
fendants or  anv  (ii  tlKin.  or  hindered  from  so  doin.u  or  ohlii^aU'd  to 
sell  to  the  ?aid  deleinLint-  or  any  u\  them  at  other  and  different 
prices  and  term-  of  payment  than  tho;-e  to  which  they  -t'verally 
ir.av  sell  to  other  i)urcha-er-. 

Fourth:  That  ih.e  tieneral  Klectric  Company  and  each  and  all  i)f 
the  said  defendant>  mentioned  in  clau-e  .-econd  hereof.  tof;ether  with 
the  Westinshou-e  Klectric  and  Manufaciurin.e;  Company,  Westing- 
house  Lamp  Comi)anv.  Aetna  Klectric  Company,  The  Cayntal 
riectric  Company,  The  Kranklin  Klectric  Mamifactur.ni,'  Company, 
l.;i  ^rty  Klectrical  Manufaclurin;,'  Coni'pany,  and  Howard  Cilmore 
and  William  Cilmore,  doin^  hu-iness  as  the  C.ilmore  Klectric  Com- 
naiiy,  all  said  defendants  l)ein^>:  co'.leclively  herein  doif^iated  "The 
Lamp  Manufacturing  Defendants,"  are  enjoined  from  tixinj^  by 
combination,  ai^reement,  understanding'  or  any  other  acts  between 
any  two,  more  or  all  of  them,  or  between  them  or  any  of  them  and 
others,  the  price  or  prices  at  which  any  incandescent  electric  lamp 
or  lam|)s  of  anv  pattern,  character,  tyjie  or  description,  whether 
made  or  sold  under  letters  patent,  license  or  otherwise,  shall  be  sold 
er  dealt  in,  either  at  wholesale  or  retail;  i)rovided  that  any  of  the 
<!.  lendants  lawfully  ownln,^  patent-  may  Rrani  to  another  defendant 
or  to  others,  or  may  receive  approjiriate  n^mufacturinj:  licenses 
under  such  patents,  or  under  any  patents  lawfully  owned  by  any  of 
ih.  defendants  or  others,  upon  terms  and  conditions  t'lxed  only  by 
thf  licensors;  provided  (ur'.ber,  that  any  such  licensor  is  hereby 
•'liuined  and  ])rohil)ited  \r<y^^  renr.irlnu  or  impo-in<:  upon   the  li- 

■        ■  '      observed  bv  the  licensee's 


'  i-i 


i-ee  the  fixing  of  a  resale  price  to  be  o 


..ndees;  and  the  purchaser-  of  such  lamps  from  either  the  licensor 
<  r  from" the  licensee  or  from  the  vendees  of  either  the  licensor  or 
licensee,  whether  at  wholesale  or  retail,  shall  not  be  in  any  manner 
^-tricted  as  to  the  price  at  which  such  lan.yis  shall  be  sold  to  the 
■-  :'  lie  or  to  anv  dealer  or  con-umer. 
I  iith:  That 'the  Cenerai  i'.lectric  Company  and  the  other  above- 


I  i  i 


mm 


43^ 


1.NULSTR1A1.    CoMIilXAlIONS    ANU    TkUSTS 


nicntii)ncd  Laiii|)  Manufacturin;,'  Dik'iilatits  arc  enjoined  from 
mLiintair.inu,  \>y  am\tnicnt.  (lit'tVrential.s  iHlwcen  lamp>  which  do 
not  in  lad  diiur  in  (jualit}-  or  tlVicitiuy,  and  -aid  dclVndanl>  an- 
enjoined  froi.,  allowing  discounts  liased  on  a.u'^rcf^Mle  jjurcha^es 
from  different  manufacturers. 

Sixth:  Th  .  the  Ceneral  Electric  Com|ianv  and  the  other  above- 
named  Lam})  Manufaa-turin;;  Defendant.-,  and  each  of  them,  their 
ofTicers,  agents  an<l  >ei\ants,  are  perpetually  enjoined  and  restrained 
from  makin.u  or  enforcing,'  any  contract-,  arran'-.^'ments,  a<,'reemenl< 
or  re(|uirements  with  dealers,  johher^  and  consumers,  who  buy  from 
the  said  defendants  either  tantalum  filament,  tungsten  filament, 
metali/ed  carbon  lilament  or  ordia.iry  carbon  I'llament  lamj)s,  or  anv 
of  them,  by  which  --uch  <iealer-.  jobbers  and  consumer-  are  cdiii- 
[JcUeil  to  purchase  all  their  ordin.iry  carbon  filament  lam],-  ii\<u\  siid 
defendants  as  a  condition  to  obtainiiiL;  smli  dther  Ivpes  of  hmiji.-,  or 
any  of  them,  or  by  which  dealers,  jobber-  and  con'-uniers  are  com- 
pelled to  i)urcha>e  any  one  or  nK^re  of  tin  a!.o\e-mentioned  typi-.-  (.1 
lamps  Irom  thi-  -aid  drUndaiil^  a-  a  c<indi;ioii  lo  the  purchase  it 
sui)plyofanyo-'ar.Ta!lof -..id  t>  pes  of  Limp-;  and  the  said  General 
Klectric  Company  and  tne  L..mp  .Manufaciurini;  Dt  fendants  alure- 
saic!  are  perpetua'ly  enjoined  and  re-trained  from  di-criminatini,' 
against  an_\'  de.der.  joliber  or  con-umer  de-irinu  to  puri  lia-e  t.mtalum, 
tun.u'-ten  or  nulali/ed  ea'-bon  lilamer.t  lamp-  beca'u.-e  of  the  fait  thai 
suih  dealer,  jobber  or  consumer  ])nrcha-e-  ordinarv  carbon  filanun! 
lamp>  Irom  other-,  and  ,irc  |)er|)elually  enjoined  .m'd  n-tr.iined  irmn 
iii-criminatin,i:  aLrain-t  an>-  d'v.ler,  j.'.bber  or  coiisunuT  deMrinj^  to 
purcha-e  any  one  or  more  ,,f  the  abo\e-mentioned  tvpes  o{  lamp- 
lu'cau-e  of  the  fact  that  >ui  h  dealer,  jobber  or  con-umer  |)urchases 
any  other  of  said  lamp-  fmm  other  n^mufaclurer-  or  dealers. 

Se\eT,;h:  'I'li.it  tin-  (iemnd  j'.lectrM  (■,,iii|..inv  .md  the  otliiT-  mi 
the  Slid  Lamp  .M.mufatturini;  Defendant-  are  periHtuallv  enjoined 
.md  re-traiiu'd  \shen  m.ikin.n  di-eount-  ba-ed  on  the  (|uanl'ity  .'I 
lam|),-  purchased  by  any  dealer,  jobber  or  eon-uiner  from  makiiiu 
-U(h  di-count-  on  I'he  ba-is  of  the  total  ■,.iantity  of  tungsten,  tanl.^ 
lu.n,  me!.ili/.ed  carlion  and  ordinary  (.irbon  lil.munt  l.imps  sold,  or 
•he  total  (|U.intiiy  of  ordinary  carbon  filament  l.imiis  and  any  <ine 
or  more  of  sui  h  other  tyju-  of  l.imps  sold:  and  the  (ieiural  Ll'eefie 
("onipany  and  the  oiher-  ..1  tlu  -.iid  Lamp  .\Linuf.u  turin^  Defend- 
atit.s  are  lurther  pi  r|Hlu.illy  enjoii'  d  and  re-trained  from  n;.ikiiii,' 
any  discount-  b.i-ed  on  th-  total  c|uantit\-  of  any  two  or  more  t\pe- 
ol  l.imp--old.uh(  1,  ilu  re-ult  i- toiombiiii' or  ajfgregate  ihi' di-u  int 


Recent  Trust  Decisions 


439 


fin  ooth  an  unpatented  lamj)  and  a  lamp  patented  or  tlaimeri  to  be 
patented:  and  tlial  said  delenduU-  and  each  and  all  of  them  are 
iHipetually  enjoined  from  utili/inj,'  any  natenl-  which  they  may 
have  or  claim  to  have  or  which  they  may  hereafter  ac()uire  or  claim 
111  have  ac(iuired,  as  a  means  of  controlling  th.e  maiiufacture  or  sale 
(if  any  tvpe  or  tyjKs  ol  lamps  not  protected  by  lawful  patents. 

Kightii:  That  the  Gemral  Kiectric  Company  and  the  other  de- 
ft ndants  are  each  enjoined  and  retrained  from  offering  or  making 
mure  favorable  i)rices  or  terms  of  sale  for  incandescent  electric  lamps 
to  the  (Ustomer>  oi  any  rival  manufacturer  or  manufacturers  than 
it  at  the  ;-ame  time  offer,-,  or  make>  to  it^  established  trade,  wliere 
the  purpose  is  to  drive  out  of  hu-ine-~  >uch  rival  manufacturer  or 
ni.uuifacturers.  or  otherwi-,-  unlawfully  to  n^strain  the  trade  and 
coniinerce  of  the  United  Stato  in  incandescmt  electric  lam|)s;  pro- 
vided that  no  defendant  i^  enioined  or  re--trained  fron^  aiaking  any 
priies  for  incandescent  eleOric  l.imp-  to  riU'ft,  or  to  compete  with, 


])reviou-ly  m; 


priiT' 

iii.imifai 

-ti.ill  be  t,.kcn  in  an\-  re- 

ciiiiipetilii^n. 


iv  anv  other  defendan.t,  or  bv  anv  riv; 


turer;  and   proviilcd   further  than   nothing   in   thi^-  decree 
t  to  enjoin  or  restrain  fair,  free  and  oijcn 


Ninth:  That  the  (imend  I'lectric  ('omi)anv.  a-  licen-or,  on 


the 


one  hand,  a.id  Westinghou-e  Idectrie  and  .M.inulacturing  Company, 
Cai)ital  I'dcctnY  Company,  The  .\etna  lllectric  Comi)an\-,  The 


rile  Libert v  Electrical 
C.il- 


iHiam 


I 'Miiklin  Kiectric  Manuf;u  turing  Company, 
M,.iiuf;icturing  Com]ian_\-.  ;ind  Howard  (lilmore  and  \\ 
ir.iire,  traduig  a-  the  dilmore  i-',k'i!ric  Conii)any,  a>  licenseo.  and 
each  and  e\erv  one  of  tiui.i,  and  their  otHnr>.  agent-  and  -er\ant-, 
are  hereby  ptrpeUi.dlv  er.joincd  and  restrained  from  operating  under 

inemcnt^  >o  far  as  such  contracts  or 


nv  lici'iise  contracts  or 

.■'iiinent>  j>ro\id(.-  tli;it    prit  es  and  te 


iru   lamps  >lial 

ing  pro\i<ions  tixiiv. 


nw  of  s.di'  of  inc.nide-(  cut 
be  lixid  otherwi>e  than  bv  die  licen>or,  or  c<in- 


th 


pnce- 


it  which  anv  |)urch.i>er  or  anv 


\iiidc.'  from  a  manufacturer  ^hall  sell  mcande-ceiil  eiectric  lamjjs. 


CHAPTKR  \I\" 

Mirriioi.:-  oi  DissoLurioN" 

NOTi: 

This  chapter  scarcely  rei,uii\-  -  a  hcadnolc.  The  dissolutions  oi 
both  the  Standard  Oil  and  I'oliaeeo  combination^  are  recent  hi>tory. 
1;  i-,  therefore,  ahnost  ncedles>  to  -tale  that  these  diriSoluti("> 
^'rew  out  of  the  decrees  handed  down  l)y  the  Supreme  Court  in  tin 
spring  ol  uyii.  The  third  cxhiljit  in  the  chapter  is  ihe  dissolution 
plan  of  th^  Powikr  IVu-l.  This  decree  followed  thr  Interlocutory 
Decree  reprinted  us  lixhibit  ^  in  the  precedinL;  chapter. — Kd. 


X-    I 


Exmiiir  1 

THE   DISSOIA'TIOa    OF    Till,    WIIRICAN    TOJiACCO   COMPANY.' 
.\nd  it  is  furthir  ordered,  adjudged,  and  di'creed,  that  ^-aid  jilan 
as  moditied  by  the  consent  of  the  j);irtic^,  or  through  the  acti'  ii 
of  thi-  court  a>  aforoaid,  i>  ar>  follow^,  to  wit: 

A. 

niSSOM'TION   or     VMSTKRPAM    SCTI'I.Y   CO. 

.\m^terdani  Supply  Co.  i-  a  company  ensajiied  in  the  bu--iness  m 
purchasinjj;  for  a  commission  or  brokirai^e.  supplie-.  other  th:in 
leaf  tobacco,  it^  i)rincipal  cu'-tonur-  bcini;  defen<lanl  corporation- 
herein.  It  h.i^  S:.;:; .000  at  i)ar  of  -t<p(  k.  all  held  in  varying  amount- 
t)\-  (  rrl  lin  corporation  defendants,  one  or  the  other  ol  your  jx'titmii- 
i-r-.  and  a  >ur[)lu-  of  Si  .'7,058.74. 

It  is  proposed  ih.it  Amsterdam  Sujtply  ( '<>.  be  di-'^olve<l.  convt  rt 
ill).;  it-  .i>-ets  into  c.i-h  .md  ditributiii'.;  thein  to  it-.  slockhouKrs. 

B. 

AHROC,  \TION'   OF    FORKICN    Rl.STRK  riVI".   COVF.NA.,TS. 
L'ndtr  the  contracts  of  September  .^7.  1002.  the  Imperial  Tobacco 
Co.  (of  ( Ire.it  bril.un  .md  Ireland.  Ltd,  1  ,ind  certain  of  it--  directer- 

'  I'liiliii  .S'Ai/'-s  of  Amirii,!  v.  Amrrii,iii  Tohiirro  Cmpiiny.  Fn  ihe  Cirtuit 
Court  of  ihe  I'niteil  Sl.ite>  lor  llie  Soullierii  Di-lriet  ')(  New  Vork,  0[)inifins  1,1 
the  t'ourl,  and  hivrec  pp.  .^o-Og.  The  draft  here  uiven  is  fiom  a  e()|)y  of  the 
dorrcc  in  Hearings  hefon-  the  CommiUff  on  Interstaie  Conirneref.  United 
Stales  Senate.  Ojnd  Conn,  ^nd  Scss.  jqii-iof  2  pp.  ioo  (T.  Thi-  aeeounts  lor 
.sjiclii  dilTennees  in  punctuation,  tlic  um'  of  italics  and  abbreviations. — Ld. 

440 


M^.TIl^l;^ 


Dl.UTION 


441 


til 


agreed  not  to  cn^a.^L'  in  the  l)usiiKss  of  inanufacluririK  or  >L'!lini; 
tobacco  in  the  L'piti'd  SlatiN,  ihe  America:)  Tobacco  Co.  and  Ameri- 
can Cigar  Co.  an<l  certain  of  their  directors  afrreed  not  to  en^atre 
in  the  business  of  manufacluriii.t;  or  sellinj^  toljacco  in  Great  Britain 
and  Ireland;  and  the  American  ToUacco  Co.,  .\nierican  Cii^ar  Co., 
and  the  Imperial  Tobacco  Co.  at,'ri',i!  not  to  en,ij;ap;e  in  the  hu-iness 
<'\  manufacturing  or  selHn.i;  tobacco  in  countries  other  than  (i^eat 
Britain  and  Irelarl  and  the  United  States.  Under  the  provisions 
',)f  these  contracts  Bri'idi-Ameri(  an  Tobacco  Co  (Ltd.)  was 
i>r;iani.<e<l  and  to{)k  over  the  export  l)usinesses  of  the  .\merican 
Tobacco  Co.,  and  the  Im[)erial  Tobacco  Co..  with  factories,  mate- 
rials, and  supplies. 

It  is  jiroposed  that  the  covenant>  lierein  ju  t  de-^cribed  as  well 
a.-  all  covenants  reslrictinj;  the  right  of  any  company  or  individual 
in  the  coml)inaiion  to  buy,  manufacture,  or  sell  tobacco  or  its  prod- 
ucts, be  rocinded  by  the  aOirmative  action  of  the  rcrpective 
parties  thereto  who  an  jiartie-  to  this  suit,  except  such  of  said 
.ovenants,  whether  or  not  contained  in  the  contracts  oi  Septem- 
ber J7,  ii;o2,  as  (<;)  relate  wholly  to  business  in  foreitrn  count  rie-  and 
are  covenants  the  benefit  whereof  has  been  assigned  or  Iran-  f(  rr(d 
lit  other  parties;  or  (h)  are  covenants  exclusively  between  foreign 
cur] Mirations  and  relating  wholly  to  tiusiness  in  or  between  foreign 
countries;  and  that  the  said  contracts  of  September  27.  kjoj,  be 
altogether  terminatc'd  ^o  far  a^  they  impo-^e  any  obligations  upon 
any  of  the  parlies  thereto  to  I'urni^'l;  or  to  refr.un  from  furnishing 
manufactured  tobaccos  t')  any  parly,  each  comjKiny  to  treat  ii'^ 
it>  own,  but  only  to  the  extv'nt  proxided  t'or  in  >aid  contract-,  all 
brands  and  trademarks  whii  li  by  -.ud  coiitraets  it  was  gi\eii  the 
right  to  manufacture  and  sell,  tlie  siid  riglU'-  having  been  ju  rpi  lud 
:nd  constituting  in  elTect  a  ion\(  vance  of  the  brand-  and  Ir.ide- 


I  com 


used  for  the  countricN  in  whii  h  tuey  v.itc  -o  u 
panic-  a-  afore-aid. 


bv 


a;li  ol 


M'.Kii(;\TI0N    OK    noMI'sric   RKSTRIC'TIVK   <<  IVF.NANTS. 

it  i>  propo-ed  that  covenants  gi\en  by  vendor  corporations, 
p.irtnirJtips,  or  individual,  or  by  stockholder^  of  vendor  corpora- 
tions, to  vendee  corporations  defendants  hen  in.  not  to  engage 
in  the  tobacco  business  or  any  other  bn-ine->  in  .my  v. .ly  embraced 
in  the  combination,  be  terminated  so  thai   .dl  -U(  h  lovenantcrs 


I  ■ 


m 


111! 


W' 


44  i 


Industrial  Combinations  and    Trusts 


shall  be  at  liberty  to  cn^'agc  in  the  bu-ine^-  of  buying',  manufaCti..- 
inj^,  aDcldealinsi;  in  tobacco  and  itsproducts  just  asif  iuchcovenai;:-, 
had  not  been  made. 

-   D. 

mSINll     ration   of   AtCKSSORV   COMPANIES. 

(i)  The  Criiliy  I-'oi!  ('(».— Tlie  ConUy  Foil  Cw.  has  a  capital 
stock  of  §825,000  at  |iar,  all  <>l  ime  cla>s,  of  u hich  llir  American 
Tobacco  Co.  owns  S4<)5,ooo  at  j>:!r,  the  balam  '  'inf^  held  by  pcr- 
son>  not  defendants  nor  Cdiniectrd  with  defendahi>.  It  is  <  ngasc:: 
in  the  business  of  manufaclurini^  tin  foil,  u  product  used  .arKcly 
by  tobacco  manufacturers,  but  having  other  u.-es  as  well.  Tk- 
Conley  Foil  Co.  has  a  plant  in  Ww  York  City,  and  it  owns  all  thr 
stock  and  bonds  of  t!\e  Johnston  Tin  Toil  &  Metal  Co.,  which  h,i- 
a  plant  in  St.  Loui^.  The  value  of  the  output  f'  ■  the  year  i-jio  of 
the  Conley  Foil  Co.  was  $1,780,520.85,  will,  a  nit  prolit  of  c--'73. 
299.82,  and  the  Johnston  Tin  Foil  &  Me"  d  Co.  had  an  output  fur 
the  year  igio  of  ilu'  value  of  $070,520.05  ;,  1  net  proli'  s  of  ?■<)(), 2^y- 
ih.  '  On  December  31,  1910,  the  Cor.Ky  Foil  ('o.  had  lanf^ible 
assets  (excludins  its  securities  of  the  John-.ton  tin  Foil  &  Metal 
Ct).)  of  $1,215,^,:!,  an<l  the  John^ton  Tin  I'oil  iV  Mttal  Co.  had 
assets  of  the  value  of  $570,802.11.  The  Conley  F(!il  Co.  ha-  ,1 
surplus  exceedinj^  the  value  of  the  securiTcs  of  the  John-ton  Tin 
Foil  &  Metal  Co. 

It  is  proposed  that  the  Corili  \  T'oii  Co.  cancel  the  bonds  of  the 
Johnston  rin  Foil  iV  Mdal  Co.  held  by  it,  to  wit.  "^100,000  par 
value,  and  distribute  to  it-  -loi  ^holders  its  holdinj^s  of  stock  of  the 
John-ton  Tin  Foil  iS;  .Metal  Co.,  to  wit,  3,000  shares,  all  of  one  clas-. 

The  American  Tobacco  Co.,  bein;^  a  stockhiilder  of  the  Conky 
Foil  Co..  will  participate  in  this  distribution,  and  (vill  in  turn  di- 
tribute  its  dividend,  as  well  as  il>  slock  in  the  Conley  Foil  Co.,  t  > 
its  conmion-stock  holders  as  hereinafter  Mt  forth 

(2)  Miu  AitdrCiiS  *>  Forbes  Co.— Mac Andri  ws  .*v;  I'orbcs  Co.  is  a 
comp.mv  havinji  a  common  capital  >tock  of  .$3,000,000  at  par,  of 
which  the  .Xniirican  Tobacco  Co.  owns  S:;, 112,900  at  par,  thi 
balance  bein^  held  by  persons  not  defendants  nor  comiected  with 
defentiants  (i  \ce|)t  less  th.m  33  per  cent  of  the  conunon  stoik 
held  by  R.  J.  Reynold^  'Tobacco  Co.),  and  $3,758,300  at  par  of 
()  per  cent  nonvoting  preftTred  stock,  of  wh.ieh  the  .\merican 
'Tobaico  Co.  holds  $750,000  at  i).ir,  ilie  b.il.inee  lieiii'.;  held  l)y 
{Krsons  not    defendants   nor   lontmUd   with   deieiidanl-.     It   i~ 


Metiious  oi    DissuLiriuN' 


443 


enfjaRed  in  tht  proiiuction  of  lirorice  [)ast<\  with  two  plants— one 
at  Camden,  X.  J.,  and  the  other  at  HaUiniore,  Md.  It  had  tangible 
assets,  December  ',i,  igio.  of  the  vaUie  ol  85,68,^,824.89  (including 
$.M  18,448. ,50  licorice  root,  with  phmts  for  its  collection  in  foreign 
countries),  and  its  sale  for  the  yar  loio  were  cj'"  the  value  of 
S.,,427,023.44.  .MacAndreu,-  &  Torlxs  Co.  succeeded  to  the 
h^;>iness  of  MacAndrews  &  Forbo,  a  partnership,  who  were  pioneers 
i.  thi..  country  in  the  production  of  licorice  paste,  and  who  had, 
fur  many  years  before  any  acquisitions  of  other  business  and 
before  they' had  any  connection  with  the  other  defendants  herein, 
more  than  50  per  cent  of  all  the  lic(jrice-paste  business  of  the 
nited  States. 

It  is  i^roposed  that  a  new  corporation  be  organized,  called  the 
1.  <.  N'oung  Co.  and  tiiat  it  shall  acf]uire  the  Baltimore  plant  of 
M.u.Vndre'AN  &  Forbes  Co.,  with  th  assets  used  therein  and  in 
connection  therewith,  of  a  'otal  value  of  Si  .000.000,  and  the  brand? 
(if  licorice  paste  manufactured  in  said  Baltimore  plant;  that  it 
i>--ue  in  i)aymep.t  therefor,  with  the  good  will  connected  therewith, 
$r.ooo,ooo  at  par  of  7  per  cent  jireferred  nonvoting  stock  and 
.^r.ooo.ooo  at  par  of  common  stock;  that  MacAndrews  &  F'o'-bes 
Co.  (li>tril)ute  the  common  -tiuk  of  tin  J.  S.  Young  Co.  as  a  djvi- 
I,.  ad  to  its  conimon--to(k  holders,  charging  the  amount  th'.-reof  to 
il~  >urplus  account;  that  .MacAndrews  &  Forbes  Co.  otTer  to  its 
|ir<l\rred->tock  holders  proportionately  to  exchange  the  7  per  cent 
prcierred  stock  of  the  J  S.  Young  Co.  at  par  for  their  pref(  rred 
>tuck  of  MacAndrew>  &  Forbes  Co.;  that  so  far  as  the  preferred 
stock  of  MacAndrews  &  Forl.es  Co.  is  thus  exchanged,  it  l)e  re- 
tired; that  -0  far  as  thi.^  preferred  stock  of  the  J.  S.  Young  Co.  is 
Hot  forthwith  thus  exchanged,  Mai  Vndrews  iV  Forbes  Co.  !)e  en- 
joined from  11-ing  ii  to  exerci-e.  or  otherwi>e  exercising  or  attcmpt- 
iiv,'  to  exerci-e,  inliuence  or  control  over  the  J.  S.  Young  Co.;  and 
uith  the  further  provi-ion  that  on  or  before  January  i,  1915,  the 
uhole  of  this  jin  ferre.l  -tock  of  the  J.  S.  Young  Co.,  r  t  theretofore 
t.iken  out  of  ill.'  Ire.i-ury  of  Mac.\ndnw^  &  V'orbes  Co.  i:y  exchange 
;i>  aforesaid,  be  di.spo-ed  of  \>y  Mae.\ndrews  &  Forbes  Co. 

riii>  would  give  to  MacAnd.rews  \-  I'orbes  C  .  a  licorice  business, 
including  Spani>!i  lictmce  and  jMrndered  goods,  of  the  net  selling 
value,  basfvl  upon  theye.ir  10 10.  of  S.\5i4,i84.04,  of  v.hich  S2,2I4,• 
I27.5I  arise  from  >ale'>  of  ont  hnind,  to  wit,  the  old  "Ship"  brand. 
The  j.  S.  ^■oung  Co..  upon  .lie  ba-is  of  the  bu-incss  for  the  year 

i,/uould  iia\e  an  oiUput  of  the  net  selling  \alue  of  $1,201,109.86. 


r      ! 


IM 


444  IXDT'STRIAL    C'oMBINA  i  IONS    AM)    TRUSTS 

Thf  American  Tobacco  Co.,  hcini;  a  holiK  r  of  l!u'  common  stock 
of  MacAndrcws  &  Forbes  Co.,  will  particiiJaU-  in  the  distribution 
above  provided  and  will  in  turn  distribute  it.-.  diMdcd,  as  well  as 
its  stock  in  Mac.Vndrews  &  J-orbe>  (,'o.,  to  its  common-stock  holiKr^ 
as  her'jinalter  -el  forth. 

(^)  Anuriitiu  Snutf  Co. — American  Snuff  Co.  is  a  manufacturer 
of  snuff.  It  holds  all  of  the  -tock  of  De  Voe  SnutT  Co.,  to  wit, 
P50,ooo  at  jKir:  and  one-half,  to  wit,  .?2(),ooo  at  par,  of  the  .-to  k 
oi"  Xational  SnutT  Co.  It  owns  no  other  interest  in  any  company 
manufacturing  or  sellin,^  snuff. 

It  is  I)ropo^e(l  that  there  he  (.r!:ani/.i'd  two  new  snulT  comjjai.i'jN 
one  to  be  calleii  tlie  (leort;e  W.  llilme  Co.  and  the  other  Weyman- 
Ikuton  Co.,  and  that  .\merican  Snuff  Co.  con\ey  to  these  tw.j 
companies,  respectively,  factories,  with  the  brands  manufacturd 
in  them,  as  follows:  To  the  Cii-orfje  W.  Helme  Co.  the  factorii-^ 
:!t  Helmetta,  X.  J.,  and  Vorklyn,  Del.,  c\ce[)t  factory  No.  5;  l< 
Wevman-Burton  Co.  the  factories  at  Chicap;o  antl  Xashvilk,  also  all 
the  stock  of  De  Voe  SnutT  Co.,  and  the  one-lialf  of  the  stock  of  Xa- 
tional SnutT  Co.  held  by  .American  Snuff  Co.  liased  upon  the  liu^i- 
ncss  for  the  year  kjio  and  the  assets  at  the  end  of  the  year,  with 
projier  provision  for  leaf,  materials,  ca-^h  and  bonk  accounts  !>■: 
ih.e  two  vendee  companies,  this  would  leave  the  three  companil■^ 
ei|iiipped  a>  follows: 

Mannfiiitiiriu^:,  tan<:,ihJr  assets. 

.American  Snuff  Co. '  S5,o75,Q0g.7; 

(leorL'e  VV.  I  lelme  Co. 4,900,000.40 

Weynian-Bruton   Co. 3,691, 58S.20 

Siilr\  valur  iliiritr.i  njio. 

.American  Snuff  Co. S5.52o,4J.'.i; 

CKiru'e  \V.  JKTme  Co. 4,404,550.(1' 

\\  e\  num-Hruton   Co. 4,297,480.71 

.American  Snuff  Co. '$1,501.2^0.40 

Ci 'orLTe  \V.  Helme  Co. i,2  5y,2So.g>> 

Weyiiiaii-i'.r'itoii  Co.  l,293>759-39 

'  .\mt'ritan  SnulT  Co.  hold.^  .sic uri lies  not  conncitcd  with  thcsnutT  business. 
to  wit:  Stoi  1;  and  txmiis  of  tlie  .Xnicri'  an  Toi).u  (o  ("o..  preferred  sloi  l^  of  .Xrair- 
iciin  t'lijar  Co..  anKr<^'Katin;;  in  l)ool;  value  $.',5,^0, 2!(). '10,  U|H)n  whii  h  .\mi'ri(M 
SnutT  Co.  p-^lvcd  in  interest  uad  dividends  during  the  year  \<)\o,%\lb.fii^- 


MkTHOUS    ok    DlSSdl.l'TION 


44  = 


l-'.ach  of  these  vendoo  corporations  will  [)ay  for  llu-  prnpirty  ami 
Irasines^  conveyed  to  it  by  the  issue  of  $4,000,000  ai  par  of  7  per 
cent  votin.n  preferred  ^t(jek  and  S4,ooo,ooo  at  par  of  common  stock. 
American  Snuff  Co.  will  thus  receive  tlie  Si().ooo,ooo  at  par  nf  the-e 
>tticks  into  its  treasury,  and  will  distribute  to  its  common-stock 
holders,  as  a  dividend,  the  common  stock  a^tjreKUting  SS,ooo,oco, 
t(i  he  char<i;ed  to  its  surjilus  account.  American  SnulT  Co.  will  t)ffer 
to  its  preferred-stock  holders  jiroportionately  to  exch.uige  these 
7  per  cent  jireferred  stocks  of  the  George  \V.  Helme  Co.  and  the 
iWvman-Brulon  Co.  for  their  preferred  stock  of  .\merican  SnutT 
('  ..  at  [)ar.  So  much  of  the  preferred  stock  of  .-\merican  SnutT  Co. 
as  is  thus  e\-chan^'ed  will  be  retire  d.  .\s  to  so  mmh  of  tlie  jireferred 
stocks  of  the  Georj^e  W.  Helme  Co.  and  the  Weyman-Hruton  Co. 
as  is  not  forthwith  thus  e\chan<j;ed,  American  Snuff  Co.  to  be  en- 
joined from  voting  it,  or  using  il  to  exercise,  or  otherwise  cxerci-ing 
i.r  attemjUing  to  exercise,  inthience,  or  control  over  the  (ieorge 
W.  Helme  Co.  or  tlu'  WcNiran-liruton  Co.;  and  r,n  or  before  Jan- 
iLiry  I,  ii)t5,  all  of  these  preferred  st()ek>  of  the  tieorge  W.  lielme 
Co.'and  the  Weyman-Uruton  Co.  not  theretofore  taken  out  of  the 
treasury  of  .\merican  SnutT  Co.  by  exchange  as  afore-aid  to  \>v  dis- 
jHi-ii-d  of  by  .\merican  SnutT  Co. 

The  .\merican  Tobacco  Co.,  being  a  holder  of  the  common  slock 
of  .\merican  SnutT  Co.,  will  jxirticipate  in  th  ■  distribution  above 
provided,  and  will,  in  turn,  di^tribute  its  dividends  as  well  as  its 
stock  in  Ameiican  SnutT  Co.,  including  that  to  be  acquired  from 
P.  Lorillard  Co.,  to  its  conmnon-stock  holders  as  .iTcinafter  M't 
forth. 

i\)  American  Slos^ic  Co. — .American  Stogie  Co.  i-  a  coinoration 
whose  only  asset  is  all  of  the  issued  stock  of  Union-. \merican  Cigar 
Oi.,  which  latter  company  has  cigar  factories  located  ut  Pittsburgh, 
Allegheny,  Lancaster,  and  Xewark.  Its  total  production,  based 
upon  inisine.-s  for  the  year  loio,  is  only  i.>S  per  cent  oi  the  entire 
production  of  cigars  in  the  United  State-^  in  volume,  and,  a-^  tliese 
[Htilioners  l)elieve,  al)out  the  same  percentage  in  value,  .\merii  an 
Stogie  Co.  has  Sq7').ooo  at  par  of  7  per  cent  cumulative  preferred 
.stock,  (    which  .\nieriran  Cigar  Co.  owns  840,000  at  p.ir,  ,ind  none 

h  is  pro[)oscil  lh.it  Ani.rii.in  SnutT  Co.  -^I'll  or  oihcruisc  riUpi.se  of  thi-s';  secur- 
iiic^vvilhin  Itirei-  years,  ami  thai  in  tlie  nicaiilinif  they  l)f  held  under  an  injune- 
tionas  is  provided  in  this  |)arai;ra|;h  with  respcel  to  seeuriliesof  the  (ieor-^c  \V. 
Helme  lo.  anil  Wevman-Hruton  Co.  to  he  fmiK.rarily  hel-i  hy  it.  It  alx)  own.? 
all,  to  wit,  Sioo.cTO  at  par  of  the  .stoi  k  u!  (.arret!  Real  I..-tale  Co.,  wliieh  will 
be  di^isolved  and  liquidated. 


1* 


I 
i 


4-|6 


Industriai.  Comhin'atioxs  and  Trusts 


of  the  other  defendants  o^vn  any;  it  has  810,879.000  at  par  of  com- 
mon stock,  of  wliich  American  Ci^ar  Co.  owns  S7,,P3.775  at  par. 
and  none  of  the  other  defendants  own  any.  There  are  accumulated 
an(i  unpaid  dividends  on  the  preferred  stock  to  the  amount  01 
$399,000  as  of  Decemijer  31,   1910. 

It  is  proposed  that  American  Stogie  Co.  dissolve,  witli  lea\r 
f,ranted  to  th"  trustees  in  (hssolutit)n  to  either  convert  the  assets 
into  cash,  and  distribute  them  among  the  stockholders  according 
to  their  rights,  or  to  etTect  such  reorganization  as  they  may  be  able 
to  etTect.  provided  that  in  either  event  there  shall  be  a  separation 
into  at  least  two  dilTerent  ownerships  of  the  factories  and  businesses 
now  owned  and  operated  by  Union-American  Cigar  Co.  If  the 
dissolution  is  followed  by  a  conversion  of  the  assets  of  American 
Stogie  Co.  into  cash,  American  Cigar  Co.  will  take  such  cash  as  it 
may  receive  into  its  treasury;  if  it  receive-  u[)on  such  di-soluti"n 
securities  of  cigar-manufacturing  concrns,  it  will  distribute  such 
as  a  dividend  to  its  common-stock  holders,  to  be  charged  to  its  sur- 
plus as  hereinafter  set  forth. 

(5)  Am-crkan  Cif^^ir  Co. — American  Cigar  Co.  is  a  manufacturer 
of  cigars.  It  has  variou.:  factories  of  its  own,  and  it  owns  all  or  a 
part  of  the  stock  of  several  eompanies  engaged  in  the  manufacture 
of  cigars,  all  of  which  companies  have  been  organized  by  it  and 
which  have  received  from  it  conveyances  of  part  of  its  business, 
operating  in  this  way  as  separate  corj)orations  for  trade  iiurjiose'^. 
Among  these        >ipanies  is  Federal  Cigar  Co. 

American  Cigar  Co.  also  owns  a  part  of  the  stock  of  Ha  van. i 
Tobacco  Co.,  which  controls  factories  manufacturing  cigars  ir 
Havana;  and  a  part  of  the  stock  of  Porto  Rican-  \merican  Tobacco 
Co.,  engaged  in  the  manufacture  of  cigars  and  cigarettes  in  I'orto 
Rico;  and  half  of  the  stock  of  Porto  Rican  Leaf  Tobacco  Co.,  111- 
gaged  in  growing  tobacco  in  Porto  Rico  American  Cigar  t"o.  it- 
self uses  large  quantities  of  Porto-Rican  growi.  kaf.  Xeitlier 
American  Cigar  Co.  nor  any  of  the  con"  xmies  in  which  it  is  inter- 
ested, except  Havana  'Tobaco  Co.  and  Porto  Rican-Amcrican. 
Tobacco  Co.,  is  engaged  m  the  manufacture  of  cigars  outside  of 
the  I'nited  States. 

American  Cigar  Cc,  including  with  its  production  the  production, 
of  companies  ot  whi';h  it  o'- ns  in  whr.k-  or  i.i  part  the  stock,  h.as,  in 
volume,  based  on  ll.e  business  fo  ihe  ye;ir  1910,  i^- ■;''  i"''  <'''"t  *'f 
the  cigar  business  v-i  tlie  rniteil  States,  and  in  value,  .is  \our  jxti- 
tioners  believe,  substantially  the  same  percentage.     Havana  'To- 


!  f 


MrnioDS  of  Dissolution 


44  7 


Wu-co  Co  ha.  directly  or  indirectly,  control  of  .^4-06  per  cent  of  the 

.  d    .n  d^iSm  of  ciffir.  in  Cub.;  46  per  cent  of  the  total  e.xi.orta- 

:;;:;  c      i 'a      rom  Cuba  to  all  countries  of  the  world,  mcluding  the 

I Xl  SUues,  and  ^S., ,  per  cent  of  the  total  exportation  of  cigar. 

^^  ir  ■  tn;::i^  S^A,:;"!Sn  Ci,ar  Co.  dispose  of  pro,..;. 

iMonnnl  t,   it.  an<l   thus  <li.intej:rate  its  business,  as  foUmNs. 

S'^That  it  sJll  to  the  American  Tobacco  Co  for  cash  its  stock, 

heing  all  thereof,  of  Federal  Cigar  Co.,  at  a  fair  price,  to  ^Mt., 

'';t;'Ti;at°Lell  to  the  American  Tobacco  Co.  for  cash  t^  stock 
i,  own    of  Porto  Rican-American  Tol)acco  Co.,  to  wit     $6,7,600 
.       r   .  t  Vf-dr  nrice   to  wit  ,  .^r.o  per  -^hare,  or  82,301,600.      _ 

T'r  1    ^eH^an  S'l   Co.dispose  of  any  interest  in  American 

.tl  e  CoM^    Sving"ca>h  proceeds  of  its  stock  in  di^olut.on 

^t    Snf  if  ■\merlcar  Sto-de  Co  upon  dissolution  converts  its  assets 

,     c  'h    ori^dltri^b^^         -  a  dividend  to  its  common-stock 

lid^outo,  it 'i^^lusthl^s^uritie.  which  ^ 

An^iriiln  CiSr  Co.  are  to  be  disposed  of  by  the  American  lobacco 

Co.  as  hereinafter  set  out. 

E. 

DISTRIBUTION  BV  THE  .VMKRIC.VN  TOT.VCCO  CO.  OF  STOCKS  OWNED  OR 
TO  BE  ACQUIRED  BY  IT. 


;'i)  hr.mcdiak 


distribiuion   of  ^torks.-Thc  American  Tobacco 


Co.  wiil'buy'fVom  P.  LoriUard  Co  .  f.^  casli  at  l^jj-'^ei  J,^47  ^harc. 

,„■  the  ■  referred  stock  of  American  Snutl  Co.  hdd  b>  1  •  ^;'"'      '^ 

■       n^'l  will  receive  as  the  sole  common-stock  holder  of  P.  Loril- 

;;:,    '      mil  bv^iy  of  divldculs,  .u,5;.4  shares  of  the  common 

L-  ,.f  Vmerlcin  SnutT  Co.  he  d  bv  P.  Lonllard  Co. 

•rt  \mTriSn  To  to  Co.  wilfdi^tribute  among  its  common- 

.     I       1     r   bv  w      ol  <lividend>.  and  to  be  charged  to  its  surplus, 

^^r'i'uf      u     :    '"f;l:foilowing-described,classes,wheU^ 

;  wned  bv  t^.r  bou-dit  by  it  from  American  Cigar  Co.,  as  hereinbe- 

l;      t  f  ,rtV  -r  bou  dit  by  it  from  P.  Lorillard  Co..  a.  just  here.nbe- 

stXceorge  W.  Helme  Co.  common  stock;  W  eyman-Bruton  Co. 


E^i; 


448 


IXDrSTRIAl.    Cf)MniN\TIONS    AND     iKlSTS 


conunoii  >tock.  M,a  Xrniriw.  ^-  I'orbc:-;  Co.  conip.ion  ^tdck ,  J.  S. 
Yuiing  Co.  common  .-'c<;ck;  llie  Conlcy  Foil  Co.  stocl-:;  the  Jt)hnston 
Tin  Foil  .ik  Metal  Co.  ^tock;  R.  J.  Rcynoklf,  Tobacco  Co.  stcuk; 
Corporation  of  Unitiil  Cl.u'ar  Stores  stock;  British-/\mcrican  To- 
bacco Co.  iLt.l.i,  ordinary  sliarcs;  Porto  Rican-Amcrican  Tobacco 
Co.  stock;  .Xmcrican  Stogie  Co.  stock  (or  what  is  received  by  way 
of  dividends  from  American  Ci;^ar  Co.  upon  dissolution  of  American 
Stopie  Co.\ 

Inciudin'j;  tlu'  amount  to  In'  p-.id  to  .Vmcrican  Cip;ar  Co.  and  I'. 
Lorillard  Co.  for  such  of  these  securities  as  are  to  be  aci'iuireci  by  tlie 
.\nieric;!n  Tobacxo  Co.  from  them.  resi)ect;\ely,  and  eAclu(Hn,t; 
tho^e  to  be  acxjuired  l)y  way  of  dividend.-,  aiul  which  theiefore  do 
not  atTect  the  surpkis  of  the  .\merican  Tobacco  Co.,  never  havinji; 
been  sit  up  on  its  books,  thc^e  securities  had  a  Ijook  \-alue  as  of 
December  31,  i()io,  of  835,01 1,865.03.  The  earninji;  capacity  of  ail 
the  above  securities  thus  to  be  distributed,  ba:  ed  upon  the  results 
of  the  vear  loio,  is  89,860,410.70,  thou.^h  not  ,dl  lliereof  was  dis- 
tributed as  dividends. 

{7]  Ddrrrcd  ilispcsilion  of  s flicks. — The  .\nurican  Tobacco  Co. 
will  -.'ll  nr  oilKrwi--e  dispose  of,  or  distribute  by  v.-.iy  of  tlividend.- 
to  its  common-stock  holders  out  of  its  surplus  at  the  ti.ne  e.xi.-tini,', 
before  January  i,  i()i5,  all  of  its  holdings  of  the  following  securities: 
Brltish-.Vmcrican  Tobacco  Co.  (Ltd.)  nonvoting  preference  shares; 
the  Imperial  Tobacco  Co.  (of  Great  liritain  and  Ireland  (Ltd.) 
ordinary  shares;  Corporation  cf  United  Cij:;ar  Stores  bonds;  Mac- 
.\ndre\\s  &  Forbes  Co.  nonvotinti;  ])referred  stock. 

During  the  time  these  securities  are  left  in  tlie  treasury  of  the 
.American  Tobacco  Co.  the  .American  Tobacco  Co.  to  be  enjoined 
from  volini;  any  thereof  that  under  the  terms  thereof  might  be 
\<)[<(]  or  usinj^  any  thereof  to  exercise,  or  otherwise  exercisinp;  or 
attemptinj^  to  exercise,  inlluence  or  control  over  the  said  comi)anies 
which  issued  the  said  securities,  resix'ctively,  and  from  .gaining 
possession  of  any  of  the  said  companies  by  buying  in  at  a  foreclo- 
sure had  under  any  of  the  securities  for  any  default  with  respect 
thereto  or  otherwise. 


S.M.F   nV   Tin,   AMI  KICAN   TOI!.\(X()  CO.   OF   MANUF.ACTIJRING   ASSETS 
.\\i)  liUSINliSS  10  CUMI'ANIES  TO  BK  FORMED. 

(i)  There  will  be  organized  ..  new  corporation  (ailed  Liggett  & 
Myers  Tobacco  Co.  an(l  a  new  corporation  called  V.  Lorillard  Co., 


Mi'.THODS  OF  Dissolution 


449 


uvl  the  American  Tohucco  Co.  will  sell,  ass.en  and  convey  to 
;lu  -e  two  companies  factories,  plants,  brand.,  and  busmesses  and 
ranital  stocks  of  tobacco-manufacturing  corporations,  as  follows. 


TO  LIGGETT  &  M\T.RS  TOBACCO  CO. 

Li^cett  &  Mvers  branch  <.f  the  American  Tobacco  Co.,  engaged  in 
the  .^nufacture  of  plug  tobacco  a.  St.  Louis,  with  the  brands  con- 

'"^lS:;:^t  Merricl,,  a  company  of  which  the  American  Tobacco 
Co  mvn.  ami  has  always  owne.l  all  the  stock  engaged  m  Chicago  in 
t  he  manufacture  of  fme-cut  toba(  co  and  smoking  tobacco. 

AU.n  &  {^^inter  branch  of  the  American  Tobacco  Co.  '-■n^f^fj 
the  manufacture  of  cigarett<.s,  at  ^^-f  7;^' ^ind" '  Wt  Sp 
connected  therewith  (this  does  not  include  the  b  and  bvvcct  Cap 
nr-.l  "  made  Dartlv  there  and  i  artlv  at  New  Y ork). 

ancago  b  anch  of  the  American  Tobacco  Co.,  a  factor>-  at  Chicago 
.ngagecTin  the  manufacture  of  smoking  tobacco,  with  the  brands  con- 

'"^Slill'Sd'i.f  the  American  Tobacco  Co.,  a  factor>.  at  St.  Louis 
.ngied  in  the  manufacture  of  sm,  .king  tobacco,  with  the  brand,  con- 

"'Sl  &  Wniu!ms  Tobacco  Co.,  a  company  of  which  the  American 
T<!l^^acco  Co.  owns  all  the  stock,  engaged  in  the  manufacture  of  plug 
and  smoking  tobacco  at  Louisville,  Ky.  r    .  „„  r.f 

The  Tohn  Bollman  Co.,  a  company  engaged  in  the  manufacture  of 
d.arett  at  San  Francisco;  of  this  coq.oratioa  the  Amc-r.can  Tobacco 
Co  owns  90  per  cent  of  the  stock,  which  it  is  proposed  to  turn  ever 
to  the!  iccett  &  Myers  Tobacco  Co.  ,.     ,  r    *  ,^ 

Pinke  ton  Tobacco  Co.,  a  coq.oration  engaged  in  the  n^anufacture 
of  scran  tobacco  (a  kind  of  smoking  tobacco)  at   Toledo,  Ohio    o 
thi      o?piration  the  American  Tobacco  Co.  owns   77^  [>-  "J^.^^ 
the  stock,  which  it  is  proposed  to  turn  over  to  the  Liggett  &  M>ers 

'^'' W  T  Jrby  branch  of  the  American  Tobacco  Co.  at  New  Orleans 
engaged  in  the  manufacture  of  cigarettes  and  sm.^.ng  tobacco,  the 
nrindinl  brands  being  'Tlome  Run"  and  king  Bee. 
'  The  I  uk  I  urhani  branch  of  the  American  Tobacco  Co.,  engaged 
inTS;  manufacture  of  cigaretn.  and^smokingU^acc.  at  Durban. 
V  C-  principal  cii'arette  brinds,  'T'ledmont  and  American 
Beauty  ";  principal  M.uking  tobacco  brand.  "  Duke's  Mixture. 


■  ir'  .  K  I  ■' 


I   i;f 


1 


-il 


MICROCOPY    RESOLUTION    TEST    CHART 

ANSI  and  ISO  TEST  CHART  No    2 


1.0 


I.I 


1.25 


Ui  |2j8 

Im 

2.2 

t      '       li  ^° 

1.8 

1.4 

1.6 

^      ^oDi   icin  iivHGE 


450 


Industrial  Combinations  and  Trusts 


Two  little  cigar  factories  located,  'he  one  at  rhila(lel|ihiu  and  the 
other  at  Baltimore,  branches  of  th  JHerican  lobacco  Co.;  principal 
brand,  "Recruits." 

to  p.   L0EILL/\RD  CO. 

All  the  right?  of  the  American  Tobacco  Co.  in  the  present  P. 
Lorillard  Co.,  to  wit:  All  the  common  stock  and  $1,506,100  at  i)ar 
out  of  a  total  issue  of  $2,000,000  of  8  per  cent  preferred  stock;  it  is 
contemplated  that  as  a  part  of  these  reorgani>;ations  the  Lorillard 
Co.,  as  at  present  constituted,  be  wound  ui)  aii<l  the  new  company 
be  organized,  taking  over  assets  of  the  P.  Lorillard  Co. 

S.  Anargyros,  a  company  enagged  '  in  the  manufacture  of  ciga- 
rettes, in  which  the  American  Tobacco  Co.  owns  all  the  stock,  and  ol 
which  it  has  always  owned  all  the  stock. 

Luhrman  &  Wilbern  Tobacco  Co.,  a  company  engaged  in  tlu 
manufacture  of  scrap  tobacco  (a  kind  of  smoking  tobacco),  of  which 
the  .-Xmerican  Tobacco  Co.  owns  and  has  for  many  yean^  owmd,  all 
the  stock. 

Philadelphia  branch  B,  at  Philadelphia,  Wilmington  branch  B,  at 
Wilmington,  Penn  Street  branch  at  Brooklyn,  Datu  ille  braiah  B,  at 
Danville,  and  Kllis  branch  B.  at  Baltimore,  branchr-  of  tiu'  .American 
Tobacco  Co.,  manufacturing  little  cigars,  the  principal  brand  being 
"Between 'he  Acts." 

Federal  Cigar  Co..  a  company  all  of  whose  stock  is,  and  ha^  always 
been,  owned  by  .\rnerican  Cigar  Co.,  but  which,  as  hereinbefore  j^ro- 
vidi'd.  is  to  be  purcha.-id  for  ca^h  by  the  .American  Tobacco  Co. 

Each  of  these  conveyances  to  incluile  proper  and  adecjuate  storage 
houses,  leaf  tobacco,  and  other  materials  and  supjilies,  provision  for 
book  accounts,  including  in  each  ca>e  a  ratable  proportion  of  the  ca-h 
held  by  the  .Anurican  Tot)acco  Co.  on  December  :^i,  kjio,  so  that 
tach  of  the  new  coqiorations  will  be  fully  eciuijiped  tor  the  conduct 
of  the  business  01  manufacturing  and  dealing  in  tob.uco. 

(:)  Rrsourcfi  ami  fapitaVr.ation  of  compouics  iuul  provisions  for 
exchanging  and  retiring  scciiritits  of  Amrriam  Tolnuco  Co. — The 
American  Tobacco  Co.  has  securities  issued  and  outstanding  as 
follows: 

6  per  cent  bonds     ..----- .$52,882,650 

4  per  cent  bond-  (ini  biding  outstanding  4  p<r  cent 

bonds  of  Consolodatcd  '   I'obacco  Co.)    -     -     -     -       51,354,100 

'  Thus  in  original. — F.d. 


Methods  of  Dissolution 


451 


(.  [KT  cent  preferred  stock 
Common  stock  -     -     -     - 


78,689,100 
40,242400 


The  American  Tobacco  Co.  in  October,  1904,  immediately  after 
ihe  meri;er.  had  an  outstanding  issue  of  its  own  4  per  cent  bonds  and 
tlie  Cu-r-olidated  Tobacco  C(j.  4  per  cent  bonds  which  it  assumed, 
amounting  to  S7S,6S9,ioo,  but  it  has  purchased  on  the  market  and 
reiired  Sj7o35,ooo  at  par  of  these  4  per  cent  bonds,  charj^mg  the 
..mount  thus  expended  to  suqilus.  The  6  per  cent  bonds  and  4  per 
cent  bonds  aforesaid  are  what  are  or(hnarily  known  as  debenture 
bonds,  and  are  issued  under  a  trust  indenture  which  imposes  a  gen- 
eral charge  or  the  property,  income,  and  earnings  of  th.  company  m 
favor,  lir-t,  of  the  6  per  cent  boi,d>,  and,  second,  of  the  4  pL'r  cent 
b.mds.  The  American  Tobacco  Co.,  after  the  reduction  of  the  surplus 
through  the  acquisition  by  it  of  4  per  cent  bonds  as  aforesaid  had 
.1,1  December  31,  loio,  a  surplus  of  SOMig.QQi.^^,  which  will  be 
increased  bv  the  suri)lus  earnings  of  the  current  year.  The  distribu- 
tion of  securities  herein  provided  for  to  be  forthwith  made,  would 
,limini>h  the  said  sun)his  by  S,VvOii.S65.o:„  the  book  value  of 
Hcurities  to  be  >o  distributed.  This  book  value  is  less  than  actual 
V  alue  but  in  view  of  the  fact  that  none  of  the  assets  of  the  American 
l-obacco  Co.  are  over%alued,  ihe  advance  of  the  book  value  <if  the 
-ecurities  to  be  distributed  as  hereinbefore  set  forth  to  their  actual 
value  woul.l  operate  at  the  same  time  to  increase  the  surplus  of  the 
.omiKinv,  and  >o  its  surplus,  after  such  distribution,  would  remain 
lu^t  the'.<xme  as  though  the  advance  to  actual  value  had  not  been 
made  on  the  books  of  the  company. 

The  properties  to  be  conveyed  to  the  Liggett  &  Myer.  Tobacco  Co. 
ind  r  Lorillard  Co.,  based  ujton  conditions  as  of  December  31,  iQio, 
the  last  'omi)leted  year,  including  in  Mich  conveyances  the  proper 
and  pn.porlionate  storage  houses,  leaf  tobacco,  supplies  and  ma  e- 
n  lU  an.l  ca^h.  but  without  anything  for  value  of  brands,  trademarks, 
tormuke.  reci,.e.,  an.l  go-ni' .  ill,  but  including  stocks  of  com- 
panies, are  of  the  value  of  S:^o,bo';,2(nA)6  to  I  iggett  &  Myers  lo- 
ha.To  Co.  an.l  S..s,o.,i,74S.S(.  to  V.  LoriUar.l  Co.  So  far  as  these 
.unditions  shall  be  change.l  bef..re  the  day  of  the  conveyance,  any 
deficiency  i-  to  !..■  ma.le  g-x^l  in  cash,  so  that  these  two  ompanies 
.Mil  have  sai.l  anH.unt>  in  tangible  asr-ets  as  afon-aul  u.etul.  and 
such  as  hav .  1h  ,  n  um  <1.  in  the  manufacture  of  the  braiuls  o  be  con- 
V,  ved  to  ilu  n,,  tv.pe.  lively,  and  cash.  The  American  1  oba.T..  (  ... 
w,U  b..  left  with  tanmble  assets,  including  >t.xks  of  companies  em- 


iMc^ 


45^ 


Industrl\l  Combinations  and  Tkusts 


ployed  in  manufacturing;  tobacco  and  its  products,  cash  and  bills  and 
accounts  receivable  (jf  the  \alue  of  S5,:;,4oS,4()S.()4  as  of  December  3 1 , 
1910.  The  profits  earned  during  the  year  1010  on  the  brands  an(i 
businesses  to  be  conveyed  by  the  American  Tobactx)  Co.  to  Liggett 
&  Myers  Tobacco  Co.  amounted  to  $7.40S.i72.o2,  and  the  profits  on 
the  brands  and  businesses  to  be  conveyed  by  the  American  Tobacco 
Co.  to  P.  Lorillard  Co.  amounted  to  85,264,729.38. 

It  is  projiosed  that  the  value  of  the  brands,  trade-marks,  recipes, 
formula-,  and  good  will  to  be  sold  to  each  of  these  companies  be  de- 
termined by  their  earning  capacity,  based  upon  the  results  for  the 
year  1910,  so  that  each  shall  have  an  earning  capacity  of  11.02  per 
cent  per  annum  u]  on  its  total  proi)erty.  including  both  •angiide 
property  and  brand  \alue  and  good  will.  Uixrn  lhi^  basis  the  con- 
sideration to  be  ])a'  ■  by  the  Liggett  &  Myers  Tt)l)acco  Co.  will  be 
$30,607,261.96,  value  of  tangible  assets  as  above  stated,  and  836,840,- 
237.04,  value  of  brands,  trade-marks,  recipes,  formula',  and  good  will, 
making  a  total  of  S(>7,447,4oo;  and  the  consideration  to  be  paid  by 
the  1'.  Lorillard  Co.  will  be  828,091,748.86.  value  of  tangible  assets  as 
above  stated,  and  819,460.752.14,  value  of  brand-,  trade-marks,  re- 
cipes, formukc,  and  good  will,  making  a  total  of  $47,552,501.  The 
brands,  trade-mark^,  recipt's,  fornnihe,  and  good  will  i.'f  the  .\mericaii 
Tobacco  Co.  on  December  31,  1910.  wire  of  th'  book  \alue  1  f 
$101,324,964.07.  The  i)ayments  for  i)rand  value,  etc.,  to  the  .Amer- 
ican Tobacco  Co.  to  be  made  by  Liggett  &  .Myers  Tol)acco  Co.  and 
P.  Lorillard  Co.,  as  aforesiid,  makes  an  aggregate  of  856,300,980.18, 
and  would  thus  leave  the  bonk  value  of  brands,  trade-marks,  recipe-, 
formula',  and  good  will  retained  by  the  .American  Ti.hacro  C  •.  at 
$45.0^,^074-''^').  which  added  to  the  85  v4o8,4()^.(,4  (,f  t.mgible  man- 
ufacturing assets  to  be  retained  by  the  .American  Tobacco  Co.,  will 
make  the  total  book  \alue  <if  manufacturing  property  to  be  retained 
by  that  company  81)8,432,473.83,  upon  which  its  earnings,  based  upon 
the  results  for  the  year  1910,  would  be  811.360,800.82,  or  11.55 
per  cent. 

The  Liggett  &  Myers  Tobacco  Co.  and  the  V.  Lorillard  Co.  would 
pay  for  these  conveyances,  therefore,  the  aggregate  as  aforesaid,  to 
wit : 

Liggett  &  Myers  Tobacco  Co. $67,447,400 

J'.  Lorillard  Co. 47.55-)50' 


AgproRntin'.: 


1 15,000,000 


Methods  of  Disl^olution 


453 


or  each  with  its  earnings  on  the  business  fur  the  year  igio  so  capital- 
ized that  said  earnings  represent  ii.oj  per  cent  upon  the  capital. 

Liggett  &  Myers  Tobacco  Co.  and  P.  Lonllard  Co.  will  issue  se- 
curitks  to  cover  such  capitalization  in  the  aggregate  as  follows:  To  an 
amount  equal  to  one-half  of  the  outstanding  6  per  cent  bonds  of  the 
\merican  Tobacco  Co.,  that  i-^.  ,S2().44i  -  -\>  at  pKir  in  7  per  cent  bond^; 
to  an  amount  equal  to  one-half  of    he  outstanding  4  per  cent  bonds 
of  the  American  Tobacco  Co.,  that  i>.  825,677,050  at  par  in  5  per 
cent  bond-:  to  an  amount  equal  to  one-third  of  the  outstanding  pre- 
;.rred  -lock  of  the  American  Tobacco  Co.,  that  is,  S:0,22().7oc  at 
i.ar  in  7  per  cent  cumulative  voting  i^referred  stock,  which,  upon 
li.uiidation  of  the  company,  shall  be  paid  at  par  with  accrued  unpaid 
dividend,  before  any  amount  shall  be  paid  to  common  stock,  with 
lialance  of  assets  di>tribulab!e  ratably  to  the  common  stock,  and  the 
lalance  of  said  8115,000,000,  that  is,  S.^(),()5i,925  m  common  stock. 
Ihe  7  per  cent  bonds  and  the  5  per  cent  bonds  to  mature  at  the  time 
iixed   re-^pectivelv.  for  the  maturity  of  the  6  per  cent  bonds  and 
the  4  per  cent  bonds  of  the  American  Tobacco  Co.  now  outstanding 
iiid  to  be  i<^ued  under  an  indenture  of  substantially  like  tenor  and 
tc  rm'^  with  the  present  indenture  of  the  American  Tobacco  Co.  uiuier 
uhich  its  6  per  cent  bonds  and  4  P^r  cent  bonds  were  issuea.     1  he 
7  prr  cent  bonds  to  have  priority  in  charge  over  the  5  per  cent  bonds 
in  the  same  way  that  the  r,  per  cent  b.a.ds  of  the  .\mer.can  I  obacco 
Co.  have  priority  of  charg.-  over  the  4  P^t  cent  bonds      Ihus  the 
capitalization  of'the  Ligget  &  Myers  Tobacco  Co.  and  P.  Lonllard 
Co.  will  be  as  follows 


Liggett  & 
Myers. 


Lorillard. 


Total. 


7  per  (cnl  li'iniH 
;  per  (flit  bonds 
7  [HT  ii-tit  prclVrriN 
('onimoii  stm  k 


1  ~l(Hk 


Total. 


$i,S,507.8?7  $io.o.V5.48S  $26,441.3^5 

15,050, 5Sg  I    10,017,461  25,677,050 

i5.3«3.'7iQ  io.845,q8i  26,229,700 

21,496.354  i   1S.'5S,S7>  3^'.t)5i.92S 

67.447  »no  '  47.55^501  I  115.000.000 


\11  of  th(-e  Mcurities  of  the  Liggett  &  .Myers  Tobacco  Co.  and  the 
i'  I  nrillard  Cn  to  be  turned  over  to  the  American  'I obacco  Co.  in 
n,vm(nt  of  thr  purcha-e  price  for  the  factories,  plant-,  brands  and 
i,u-;ine-es  an-l  capital  -toeks  of  tobacco  manuf.rturmg  corpora  u>us 
M.'to  be  conveyed  to  Ligtiett  &  Myers  Tobacco  (  o.  and  1 .  Lonllard 
Co.,  re-iHctivcly,  as  hercinbcicrc  sol  out. 


454 


Industrial  Combinations  and  Trusts 


These  securities  will  be  disposed  of  by  the  American  Tobacco  Co. 
as  follows: 

The  common  stock  will  be  offered  for  cash  at  par  to  the  holders  of 
the  common  stock  of  the  American  Tobacco  Co.  in  proportion  to  their 
holdings,  and  any  not  purchased  by  the  person  thus  entitled  thereto 
shall  be  sold  to  persons  other  than  the  individual  defendants,  to  the 
end  that  such  otter  of  common  stock  of  the  two  new  C()m{)anies  to  the 
common-stock  holders  of  the  American  Tobacco  Co.  shall  not  be 
used  by  the  individual  defendants  to  increase  their  ownership)  therein 
beyond  the  proportion  of  their  holdinj^s  of  the  common  stock  of  the 
American  Tobacco  Co. 

To  each  holder  of  the  6  per  cent  bonds  of  the  American  Tobacco  Co. 
an  offer  ^hall  be  made  to  acquire  his  bonds  for  cancellation  and  to  give 
in  exchange  therefor,  as  to  one-half  thereof,  new  7  per  cent  bonds  of 
Liggett  &  Myers  Tobacco  Co.  and  P.  Lorillard  Co.  at  par,  and  in 
payment  for  the  other  half  thereof  cash  at  the  rate  of  Si  20  and  ac- 
crued interest  for  each  $100  face  value  of  the  bonds. 

To  each  holder  of  the  4  per  cent  bonds  of  the  American  Tobacco 
Co.  an  offer  shall  be  made  to  accjuire  his  bonds  for  cancellation,  and 
to  give  in  exchange  therefor,  as  to  one-half  thereof,  new  5  per  cent 
bonds  of  Liggett  &  Myers  Tobacco  Co.  and  P.  Lorillard  Co.  at  par, 
and  in  payment  for  the  other  half  thereof  ca>h  at  the  rate  of  Sg6  and 
accrued  interest  for  each  Sioo  face  value  of  the  bonds. 

To  each  hokler  of  the  preferred  stock  of  the  .\merican  Tobacco  Co. 
an  offer  shall  \,v  made  to  ac(|uirc  one-third  of  his  stock  for  cancella- 
tion in  exchange  for  an  ecjual  amount  at  par  of  Liggett  &  Myers 
Tobacco  Co.  and  P.  Lorillard  Co. 

On  account  of  the  larger  capitalization  of  the  Liggett  &  Afvers  To- 
bacco Co.,  as  compared  with  the  P.  Lorillard  Co.,  each  class  of  the 
new  s(>cnrities  will  issue  in  the  proportion  of  58.65  per  cent  thereof 
of  Liggett  &  Myers  Tobacco  Co.  securities  and  41.^^5  per  cent  thereof 
of  P.  Lorillard  Co.  securities.  The  stocks  will  be  issued  in  shares  of 
Sioo,  and  coupon  bonds  in  denominations  of  Si.ooo,  and  registered 
boiids  in  larger  denominations,  and  in  denominations  of  Sioo  and 
$50,  and  in  actual  issue  fractions  will  be  eliminated. 

The  common  stocks  of  the  two  companies  aforesaid  are  to  be  sold 
as  above  set  out  prior  to  March  i,  IQ12.  with  three  years  to  be  al- 
l(;wf(i  for  the  retirement  of  the  bonds  and  preferred  <tf.rk  of  the 
American  Tobacco  Co.,  as  above  set  out.  Pending  such,  the  said  7 
pT  cent  bonds,  5  [)er  cent  bonds,  and  7  per  cent  preferred  stocks  of 
the  Liggett  &  Myers  Tobacco  Co.  atul  the  P.  Lorillard  Co.,  together 


Mti'Hi^DS  OF  Dissolution 


455 


with  an  amount  in  ca.~h,  (jr  in  securities  owned  by  the  American  To- 
bacco Co.,  at  their  book  value,  or  partly  in  cash  and  partly  in  such 
securities,  (;qual  to  the  amounts  recjuired  if  all  such  sales  and  ex- 
changes are  made,  will  be  deposited  with  the  Guaranty  Trust  Co.  of 
New  York,  the  trustee  in  the  indenture  under  which  the  b  per  cent 
bonds  and  the  4  per  cent  bonds  of  the  American  Tobacco  Co.  are 
issued,  as  the  agency  to  effect  the  purchase  and  exchange.  Such 
deposit  will  !)e  made,  not  to  secure  nor  create  a  trust  fund  for  the 
bonds,  but  for  the  purpose  of  sequestrating  and  taking  from  the  con- 
trol of  the  American  Tobacco  Co.  the  securities  and  cash  so  deposited. 
During  the  time  of  such  deposit  the  securities  shall  be  in  the  name  of, 
a-  well  as  in  the  custody  of,  said  trust  company,  with  any  voting 
rights  attaching  thereto,  but  the  American  Tobacco  Co.  shall  receive 
from  the  trust  company  all  dividends  and  interest  collected  by  it  on 
account  of  such  securities;  and  the  American  Tobacco  Co.  shall  have 
the  right  at  any  time  and  from  time  to  time  to  sell,  at  such  price  as 
it  may  determine,  and  direct  the  delivry  of  any  of  such  securities 
(except  the  securities  of  Liggett  &  Myers  Tobacco  Co.  and  P.  Loril- 
lard  Co.),  the  consideration  therefor  to  go  into  the  hands  of  said 
trust  comjiany;  or  to  withdraw  any  of  such  securities  (except  the 
securities  of  Liggett  &  Myers  Tobacco  Co.  and  P.  Lorillard  Co.)  for 
the  purpose  of  distribution  among  its  common-stock  holders,  if  its 
surplus  at  the  time  permits;  or  to  substitute  other  securities  of  like 
hook  value  for  the  securities  so  deposited  (except  as  to  the  securities 
of  Liggett  &  Myers  Tobacco  Co.  and  P.  Lorillard  Co.) ;  or  to  alter  the 
relati\e  projior'tion  of  cash  and  securities,  it  being  the  intent  of  this 
l)rovision  that  there  shall  be  sequestrated  from  the  control  of  the 
American  Tol)acco  Co.  all  the  securities  of  the  Liggett  &  Myers  To 
bacco  Co.  and  P.  Lorillard  Co.,  and  an  additional  amount  of  cash  or 
other  securities  etjual,  upon  the  purchase  basis  aforesaid,  to  the  value 
of  the  4  i)er  cent  bonds  and  the  6  per  cent  bonds  of  the  American  To- 
bacco Co.  at  tlie  time  out>tan(ling.  At  the  end  of  the  three  years,  if 
there  arc  any  of  such  securities  of  the  Liggett  &  Myers  Tobacco  Co.  or 
i*.  Lorillard  Co.  in  the  hands  of  such  trust  comjiany  undisposed  of 
bv  <-uch  evchange  as  aforesaid,  then  the  American  Tobacco  Co.  shall 
;ipplv  to  thir^  court  for  an  order  as  to  the  disposition  thereof.  Noth- 
ing contained  in  this  provision,  and  nothing  d(^ne  under  this  provision, 
shall  be  construed  as  providing  for  tlie  creation  of,  or  as  creating, 
any  lien  or  security  on  anything  dcjio-ited  v.ith  the  tru^t  company 
in  favor  (,f  the  f)  per  cent  botub  or  the  4  per  cent  bonds  of  the  .'Vmcr- 
ican  Tobacco  Co.,  outst,uulini;;  or  otherwi-e. 


456 


Industrial  CoMcixATioNb  and   Trusts 


G. 

VOTING   RIGHTS  TO   PRKFERRKD   STOCK. 

By  proper  amendment  of  the  certificate  of  incorporation  of  \]v 
American  Tobacco  Co.  the  {)referre(i  stock  will  be  .i,nven  full  votii  •' 
rights. 

H. 

CERTAIN   INCIDr.NTAL   I'ROVISrONS. 

(i)  P.  Lorillard  Co.  i.s  a  New  Jersey  compar.v  viih  S^.ooo.ooo  of 
common  stock,  all  of  which  is  owned  by  the  An'erican  lobacco  Co., 
and  $2,000,000  of  S  per  cent  preferred  stock.    Of  this  j '.referred  stock 
the  .American  Tobacco  Co.  holds  Si.5q6,ioo  at  [)ar  and  there  is  held 
by  others  S4o,:;,9oo  at  [)ar.    Under  the  laws  of  New  Jersey  the  present 
P.  Lorillard  Co.  may  be  dissolved  by  the  holders  of  two-thirds  of  the 
outstanding  stock,  and  upon  such  dissolution  the  j)refeired  stock  is 
entitled  to  be  paid  at  f)ar,  the  l)alance  of  the  assets  going  to  the  com- 
mon stock.    In  view  of  the  fact,  however,  that  the  preferred  stock  of 
the  present  P.  Lorillard  Co.  is  an  8  y^er  ci'ut  preferred  stock  with 
abundant_  as.sets  and  earnings  to  make  the  priiicii)al  and  income 
secure,  it  is  deemed  fair  to  the  ho'ders  of  this  outstanding  S403.Q00  of 
preferred  slock  that  they  be  given  an  opjiortunitv  to  take,  at  their 
option,  either  cash  at  par,  which  thty  are  legallv'entilled  to.  or  the 
7  per  cent  [)referred  -tock  (»f  the  prnposcd  new  P.  Lorillard  Co.    As 
the  preferred  slock  of  the  new  P.  Lorillard  Co.  is  to  be  a  7  per  cent 
preferred  stock,  the  holders  of  said  $403,000  of  said  j)resenl  f)referred 
slock  will  be  offered  stock  of  the  new  company  at  \hv  rate  of  Si  14.J5 
for  each  share.     It  is  therefore  proposed  that  the  new  J'.  Lorillard 
Co.  provide  for  an  additional  amount  of  {^referred  stock  sufficient  to 
take  care  of  S4o;v<)oo  [)referrfd  stock  on  that  basis,  to  wit,  S114.25  in 
new  7  per  cent  preferred  stock  for  each  Sioo  of  said  stock,  amounting 
to  8461,600  at  par  of  preferred  stock  in  adilition  to  that  set  out  here- 
inbefore.    In  view  of  the  fact  that  in  the  statements  hereinbefore 
made  as  to  earnings  of  the  P.  Lorillard  Co.  there  is  included  only  such 
part  of  the  earnings  of  the  (iresent  P.  Lorillard  Co.  as  accrued 'to  the 
proportion  of  its  stock  In  Id  by  the  American  Tobacco  Co..  this  in- 
crease of  pn  terred  -Unk  would  increase  proportionately  the  profits  of 
the  P.  Lorillard  Co..  and  does  nn|  dt  range  anv  of  the't'iruns  hircin- 
before  gi\en  or  gi\en  in  any  of  the  e.vhibits  hereto  and  hereinafter 
referred  to. 


Methods  of  Dissolution 


457 


(2)  American  SnutT  Co.  manufactures  and  sells  a  brand  of  snutT 
called  "Garrett,"  which  has  a  lar^e  sale  in  the  southern  and  south- 
western sections  of  the  country.    Originally  this  brand  was  manu- 
factured at  Yorklyn,  Del.,  and  in  part  packed  in  Philadelphia. 
Several  years  ago  American  SnulT  Co.  determined,  on  account  of 
freight-rate  conditions,  to  manufacture  thi>  brand  at  Clarksville, 
Tenn.,  and  to  pack  it  at  Memphis,  Tenn..  and  that  the  factories 
at  Yorklyn,  Del.,  should  be  given  up  to  the  manufacture  of  other 
brands.    It  has  yet,  though,  been  unable  to  protluce  in  Clarksville, 
Tenn.,  goods  similar  to  the  good-  heretofore  and  now  made  by  itat 
\orklyn,  Del.,  although  the  expt-iment  is  .,till  in  progress,  and  with 
hope  of  success.     Under  the  plan  hereinbefore  outlined  the  brand 
•■Garrett"  snutT  is  allotteti  to  American  SnulT  Co.,  and  the  factories 
other  than  me  factory  at  Yorklyn,  Del.,  are  allotted  to  George  _\V. 
Helme  Co.;  vour  jjelitioners  pray  that  in  the  api)roval  and  adoption 
by  this  court  of  this  plan,  American  SnutT  Co.  and  George  W. 
lielme  Co.  be  peimitted  to  n^inufacture  brands  the  one  for  the 
other  for  a  period  not  exceeding  one  year  from  March  i,  191 2, 
each  company  paving  to  the  other  as  consideration  for  such  nianu- 
factui-e  the  co^t  thereof  plus  5  per  cent;  the  necessity  of  paying  5 
l)er  cent  above  cost  is  sulTuient  inducement  to  each  company  to 
manufacture  it  >  own  goods  as  soon  as  American  SnutT  Co.  i^  al)le  to 
manufacture  •'Ciarrett"  snutT  of  the  reriuisile  character  and  kind 
in  its  Clarksville  factorv,  thus  leaving  the  Yorklyn  factories,  other 
than  No.  5,  for  the  manufacture  by  the  George  W.  Helme  Co.  of 
its  own  brands. 

This  court  having  heard  tlie  parties  as  directed  by  the  Supreme 
Court  of  the  United  Stales,  it  is  further  ascertained  and  determined, 
and  ordered,  adjudged,  and  (iecreed  that  said  plan  hereinbefore 
r-et  forth  is  a  plan  or  method  which,  taken  with  the  injunctive  pro- 
vir-ions  hereinafter  set  forth,  will  dissolve  the  combination  lieretofore 
adjudged  to  be  illegal  in  this  cause,  and  will  re-create  out  of  the 
elements  now  compo>ing  it  a  new  condition  vli'ch  will  be  honestly 
in  harmony  with,  and  no'  repugnant  to,  the  law,  and  without  un- 
ncces'^ary  injury  to  the  public  or  the  right>  of  private  _proi)erty. 

It  is  further  imlered,  adjudged,  and  decreed  that  the  sai(l  plan  as 
hereinabove  set  forth  he,  and  it  is  hereby,  approved  by  this  court, 
rnd  the  defendants  herein  ;ue,  respectively,  directed  to  proceed 
fo'-thwith  to  carry  the  same  into  etTect. 

The  necer^Mties'of  the  situation,  in  the  ■'id-meiU  of  this  eourt, 
n  quiring  the  exten^Ton  of  the  period  for  carrying  into  execution 


ill 


n 

1 

111 

i 


45S 


Industrial  Combinations  and  Trusts 


^ai(l  plan  to  a  further  time  nut  to  exceed  Oo  day-,  from  Decem- 
ber ,^o,  i()ir. 

It  is  further  ordered,  adjudged,  and  decreed  that  the  defendants 
be  allowed  until  February  28,  191 2,  to  carry  said  plan  into  execu- 
tion. 

It  is  further  ordered,  adjudged,  and  decreed  thr.t  the  defendants. 
their  ofTicers,  directors,  servants,  agents,  and  employees  be,  and 
they   are   hereby,   severally   enjoined  and   restrained   as   follows: 

From  continuing  or  carrying  into  further  elTect  the  combination 
adjudged  illegal  in  this  cause,  and  from  entering  into  or  forming 
any  like  combination  or  conspiracy,  the  elTect  of  which  is  or  will  be 
to  restrain  commerce  in  tobacco  or  its  products  or  in  articles  used 
in  connection  with  the  manufacture  and  trade  in  tobacco  and  its 
products  among  the  St,;tes  or  in  the  Territories  or  with  foreign  na- 
tiiHis,  or  to  prolong  the  unlawful  monopoly  cf  such  commerce  ob- 
tained and  possessed  by  the  defendants  as  adjudged  herein  in  viola- 
tion of  the  act  of  Congress  approved  July  2,  i'^qo,  cither: 

1.  By  causing  the  conveyance  of  the  factories,  plants,  brands,  or 
business  of  any  of  the  14  corporations  among  which  the  properties 
and  businesses  now  in  the  combination  are  to  be  distributed,  to 
wit,  The  American  Tobacco  Co.,  Liggett  &  Myers  Tobacco  Co.',  P. 
Lorillard  Co.,  .Xnieric  m  SnulT  Co.,  George  VV.  Helmc  Co.,  Wcyman- 
Bruton  Co.,  R.  J.  Reynolds  Tobacco  Co.,  British-American  To- 
bacco Co.  (Ltd.),  Porto  Rican-American  Tobacco  Co.,  MacAn- 
drews  &  Forbes  Co.,  J.  S.  Young  Co.,  The  Conlev  Fc^il  Co.,  The 
Johnston  Tin  Foil  &  Metal  Co.,  and  United  Cigar  Stores  Co..  to 
any  other  of  said  corporations,  by  placing  the  stocks  of  any  one  or 
more  of  said  cor{)orations  in  the  hands  of  voting  trustees  or  control- 
ling the  voting  power  of  such  stocks  by  any  similar  device;  or 

2.  By  making  any  express  or  implied  agreement  or  arrangement 
together  or  one  with  another  like  those  adjudged  illegal  in  this 
cause  relative  to  the  control  or  management  of  any  of  said  14  cor- 
porations, or  the  price  or  terms  of  purchase  or  of  sale  of  tobacco 
or  any  of  its  products  or  the  supplies  or  other  products  dealt  with  in 
connection  with  the  tobacco  business,  or  relative  to  the  purchase, 
sale,  transportation,  or  manufacture  of  tobacco  or  its  products  or 
supplies  or  other  products  dealt  with  as  aforesaid  by  any  of  the  par- 
ties hereto  which  will  have  a  like  elTect  in  restramt  of  commerce 
among  the  States,  in  the  Territories,  and  with  foreign  nations  to 
that  of  the  combination,  the  operation  of  which  is  enjoined  in  this 
cause,  or  by  making  any  agreement  or  arrangement  of  any  kind 


Methods  ok  Dissoi.utkjn 


459 


with  any  other  of  such  corporations  under  which  tr.idc  or  business 
i-,  apportioned  between  such  corporations  in  respect  either  to  cus- 
tomers or  locaUties. 

;.  By  any  of  said  14  coriwrations  retaining  or  employing  the 
-,ime  clerical  organization,  or  keeping  the  same  ofhce  or  offices,  as 
any  other  of  said  corporations. 

4.  By  any  of  said  14  corporations  retaining  or  holding  capital 
>tock  in  any  other  corporation  any  i)art  of  whose  stock  is  also 
retained  and  held  by  any  other  of  said  corporations:  Provided,  lanc- 
rirr,  That  this  prohibition  shall  not  apply  to  the  holding  by  the 
I'orto  Rican-American  Tobacco  Co.  and  .Xmerican  Cigar  Co.  of 
-lock  in  Porto  Rican  Leaf  Tobacco  Co.,  nor  shell  it  apply  to  the 
holding  of  stock  of  the  National  SnutT  Co.  (Ltd.),  by  Weymaii- 
Bruton  Co.  and   Brili-h-American  Tol)acco  Co.   (Ltd.). 

5.  By  any  of  said  14  corporations  doing  business  directly  or  in- 
directly under  any  othei  than  its  own  corporate  name  or  the  name 
of  a  subsidiary  corporation  controlled  by  it:  Provided,  hoitrver, 

That  in  case  of  a  subsidiary  corporation  the  controlling  corporation 
shall  cause  the  products  of  such  subsidiary  corp(jration  which  are 
^old  in  the  United  States  and  bear  the  name  of  the  manufacturer, 
to  bear  also  a  statement  indicating  the  fact  of  such  control.  _ 

6.  By  any  of  said  14  corporations  refusing  to  sell  to  any  jobber 
any  brand  of  any  tobacco  product  manufactured  by  it  except  upon 
(H)ndition  that  such  jol)bcr  shall  purchase  from  the  yendor  some 
other  brand  or  product  al.-^c  manufactured  and  sold  by  it:  Provided, 
Iioii'fver,  That  this  prohibition  shall  not  be  construed  to  apply  to 
what  are  known  as  "combination  orders"  under  which  some  brand 
or  product  may  be  offered  to  a  jobber  or  dealer  at  a  reduced  price 
on  condition  that  he  purchase  a  giyen  quantity  of  some  other  brand 
or   product. 

It  is  further  ordered,  adjudged,  and  decreed  that  durmg  a  period 
of  live  years  from  the  date  hereof,  each  of  said  14  corporations 
tuTeinbefore  named,  its  officers,  directors,  agents,  seryants,  and 
.•nii)loyees.  are  hereby  enjoined  and  restrained,  as  follows: 

1.  None  of  the  said  14  corporations  shall  have  any  officer  or 
ilirector  who  is  also  an  officer  or  director  in  any  other  of  said  corpora- 
tions. 

2.  None  of  said  14  corporations  shall  retain  or  emiiloy  the  same 
.igent  or  agents  for  the  purchase  in  the  United  State-,  of  tobacco 
kvif  or  other  raw  material,  or  for  the  sale  i-  ihe  United  States  of 
tobacco  or  other  products,  as  that  of  any  other  of  said  corporations. 


460 


Inulstriai.  Combinattons  anu  Trcsts 


3.  None  of  said  14  coqxjrations  shall  directly  or  indirectly  ac- 
quire any  stock  in  any  other  of  ^aid  cori)()rations,  or  purchase  or 
acquire  any  of  the  factories,  plants,  brands,  or  business  of  any  other 
of  said  corporations,  or  make  loans  or  otherwise  extend  linancial 
aid  to  any  other  of  -aid  corporations. 

The  provision>  of  this  decree  shall  apply  only  to  trade  and  com- 
merce in  or  between  the  several  States  and  'IVrritories  and  the 
District  of  Columbia,  and  trade  and  commerce  between  the  United 
States  and  foreif^n  nations. 

It  is  further  ordered,  adjudj^ed,  and  decreed  that  British- 
.\merican  Tobacco  Co.  (Ltd.)  ;md  the  Imperial  Tobacco  Co.  (of 
CJreat  Britain  and  Ireland,  Ltd.)  shall  not  act  as  agent  for  each 
other,  nor  employ  a  common  agent,  for  the  purchase  of  leaf  tobac.o 
in  the  United  States,  and  neither  of  said  two  comjianies  shall  unite 
with  any  of  the  r-aid  1.1  corporations  among  which  the  properliLn 
and  businesses  now  in  the  combination  are  ti/  be  distributed,  in  the 
emjiloyment  of  a  common  agent  for  the  purchase  of  tobacco  leaf 
in  tne  United  States. 

It  is  further  ordered,  adjurlgcd,  and  decreed  that  eaci^  of  the  2g 
individual  defendants  in  this  suit  be  enjoined  and  restrained  from 
at  any  time  within  three  years  from  the  date  of  this  decree,  acquir- 
ing, owning,  or  holding,  diredly  or  indirectly,  any  stock,  or  any 
legal  or  ecjuitable  Mitere:~t  in  any  stock  in  any  one  of  said  14  corpora- 
tions, except  Briti.Nh-.\merican  Tobacco  Co".  (Ltd.),  in  excess  of  the 
amount  to  which  he  will  be  entitled  under  the  provisions  of  the 
plan  when  the  same  shall  have  been  carried  out  as  pro[)osed  as  the 
pre  -nt  owner  of  the  amount  of  stocks  in  said  several  companies 
shown  by  the  afTidavits  of  said  several  defendants  filed  herein  on  the 
i6th  day  of  Xovemb?r,  iqii:  Provided,  htnvnrr.  That  any  of  said 
defendants  may,  notwithstanding  this  jirohibition,  acquire  from 
any  other  or  others  of  said  defendants,  or  in  ca.se  of  death  from 
their  estates,  any  of  fhc  stock  held  by  such  other  defendant  or 
defendants  in  any  of  said  cori)orations. 

It  is  further  ordered,  adjudged,  and  decreed  that  the  new  com- 
panies who.se  organization  is  pnnnded  for  in  the  jilan  hereinabove 
set  forth,  to  wit:  Liggett  &  Myers  Tobacco  Co.,  P.  Lorillard  Co., 
George  VV.  Ilelme  Co.,  Weyman-Bruton  C;).,  and  J.  S.  Young  Co., 
shalK  after  their  formation  and  by  apjuopriate  [)n)ceeding,  be  made 
parties  defendant  to  this  cause  and  subject  to  the  jirovisions  of 
this  decree  and  bound  by  the  injunctions  herein  gr.inted. 

It  is  further  ordered,  adjudged,  and  decreed  that  anv  partv  hereto 


Ml  rnous  oi'  Dissolution 


461 


may  make  application  tci  tlu'  court  foi  >uc!i  oriicrs  and  directions 
a-  may  be  necosary  or  proper  in  relation  to  the  carrying  out  of 
~.ii(|  plan,  and  the  provisions  of  lhi>  decree. 

It  is  further  ordered,  adjudijed,  and  decreed  t>.at  the  costs  ol  this 
;u  tioii  shall  be  paid  by  the  defendants  other  than  R.  P.  Richardson, 
jr.,  &  Co.  (Inc.),  as  to  whom  the  suit  has  heretofore  been  rii-missed, 
.'ii'.d  the  payment  by  the  defendant,  the  American  Tobacco  Co.,  of 
the  reasonable  costs  and  counsi-1  lees  of  the  committees  organized 
P  .r  the  protection  of  the  ()  jxt  cent  bonds,  4  per  cent  bond-  and  pre- 
urred  stock  of  the  .\merican  'rol)acco  Co.  is  herel)y  approved. 

It  is  further  ordered,  adjudged,  and  decreed  that  the  defendants, 
the  American  Tobacco  Co.,  MacAndrews  &  Forbe>  Co..  American 
Snuff  Co.,  and  each  of  them  and  their  and  each  of  their  otTicers, 
directors,  servants,  agenls,  and  employees,  be  severally  enjomcd 
and  restrained,  as  in  said  plan  set  forth,  from  votinj,'  slocks,  exer- 
cising influence  or  control  over  other  companies  or  gaining  posses- 
Mon  of  other  companies  through  the  use  of  securities  temporarily 
held  by  them,  respectivelv,  under  said  plan  in  each  and  every  case 
in  wliich  it  is  provided  in  and  by  the  said  plan  that  any  of  said 
three  la>t-named  defendants  shall  be  so  enjoined. 

It  is  further  ordered,  adjudged,  and  decreed  that  such  books  and 
l)apersof  the  defendants,  the  \merican  Tobacco  Co.  and  S.  Anargy- 
ros,  or  either  of  them,  as  relate  to  the  suit  of  the  Ludington  Ciga- 
rette Machine  Co.  V.  S.  Anargyros  and  the  American  Tobacco  Co., 
or  the  subject  matter  thereof  or  anv  part  thereof,  be  preserved  by 
the  said  defendants,  respectively,  un'il  after  the  accounting,  if  .-ny 
shall  take  place  in  said  suit,  and'  said  suit  be  Imally  determined  and 

ended.  .....         , 

It  is  further  ordered,  adjudged,  and  decreed  that  jurisdiction  of 
this  cause  is  retained  by  this  c.vurt  for  the  i)urpose  of  making  such 
other  and  further  orders  and  decree^  if  any,  as  may  become  neces- 
sary for  carrying  out  the  mandate  of  the  Supreme  Court. 

November  16.  igii. 

E.  Henry  L.\ro\iBF., 

Circuit  Jitd^r. 
.\i.iRi  D  C.  Coxr.. 

Circuit  Judge. 
II.  G.  Waro. 

Circuit  Judge. 
Wai.tkr  C.   Xovks. 

Circuit   Jud"e. 


462 


IXDUSIRIAL    CoMBINATIO.N^    AND    TRUSTS 


Exhibit  i 
Tin:  D'.iSdi.rTKiN"  of  tiii,  standard  oil  company* 

STANDARD   Oil.    COMPXNV    fOK    NKW    JKRSKY). 
20    liROADWAV, 

Xfw   York,  July   :8,   1911. 
To  the  Stncknoldcrs  of  ihc 

Slancianl  Oil  ("om;)any  (of  Xcw  Jersey): 

Obedience  to  the  t'liial  Decree  in  the  case  of  the  United  States 
against  the  Standard  Oil  Company  (of  New  Jersey),  and  other-. 
rcqui'cs  this  Company  to  distribute,  or  cause  to  he  distributed,  ratably, 
to  its  stockholders  the  shares  of  stork  of  the  foUoiviir^  eorpnratio'-s, 
iL'liieh  it  oioi::  directly  or  Ihr  ^ui^h  its  on'ncrslup  of  stock  0/  the  Xatioiiii! 
Transit  Company.-  to  wii;  An^lo-AnuTican  Oil  Company,  Limited, 
The  .\thintic  Retinini,'  Company;  ilorne-Scrymser  Company, 
The  lUukeye  I'iiK'  Line  Company;  Che>el)rou^]i  .NLiMifacturiiiLj 
C\)mpany,  Consol'il  ted  Colonial  Oil  Coi.ipany;  Continental  Oil 
Company;  The  Crescent  Pipe  Line  Company:  Cumherlanfi  Pipe 
Line  Company,  Incorporated;  The  Eureka  l'ii)e  Line  Company, 
C.dena-SiKnal  Oil  Company;  Indiana  Pipe  Line  Comj).iny ;  X.ition,.! 
Tr:tn-~it  Com]), my;  Xew  \'ork  rr:in^it  Cimipaiiy;  Xorthern  Pijie 
Line  Conip.nu',  \']h'  Oiiio  Oil  Comi)any;  I'he  Prairie  Oil  anil  Gas 
Com|)any;  The  Sol, ir  Ri'lminix  (-"om]xiny;  Southern  Pipe  Line  Com- 
pany; .South  i'enn  Oil  Comp.uiy;  South  We-t  Pemisxlvama  Pipe 
Lines;  Standard  Oil  <'om|)any  (California);  Standard  Oil  Comfianv 
(Indiana);  The  St.md.ird  ()il  Company  (Kansas);  Standard  Oil 
Conip.uiy  (  Kentucky);  St.uulard  Oil  Company  (Xebra^ka);  Stan 
dard  Oil  Comi),iny  'if  Xew  York;  The  St.uiihird  Oil  Company 
(Ohio);  Swan  &  Liiuh  Comi)any;  Union  T.uik  Line  Company, 
Vacuum  Oil  Company;  Washington  Oil  Company;  WatersT'ierii' 
Oil  Company. 

Such  distribul  ion  will  be  ni,idc  to  the  ■'toe  kholijcrs  of  the  St.indard 
Oil  Comp.iny  (ol  New  Jersey)  of  record  on  the  i-t  d,iy  of  September. 
101 1 .  and,  for  tliit  puri)ose,  the  transfi  r  books  o(  tlie  Comi)any  will 
l)e  closed  on  tlu'  ^ist  tlay  of  .\ugUht,  Kju,  ,it   ^  o'l  lock  P.  ^L.  and 

'  Li'ttiT  of  the  StJind.ird  Oil  Cnnip.inv  to  its  storkholiicrs.  Tlic  Si,Liiil;\r<I  ( )il 
Company  lia<i  no  dissolution  plan  siiih  as  was  prcp.irtij  liy  tlic  I'lilwuo  C  mii- 
paiiv.    It  miri'lv  foilowi'd  liic  decrcL-  of  llic  Supreme  Court. — Ld. 

Mtaliis-ff  !!•;■  I'dllor'-. 


Methods  of  Dissoli-tion- 


4'',^ 


kept  closed  until  the  date  when  said  slocks  are  ready  for  distri- 
bution, which  it  is  expected  will  be  about  December  i.  iqii. 

Xotice  of  the  date  when  said  stocks  are  to  be  distributed  and  ot 
the  re-opening  of  the  books  will  be  duly  given. 

Yours  vcrv  trulv, 

H.  C.  FoLGER.  Jr.. 
Secretary. 

ExiiiniT  s 

TIIF.  DISSOLVTION  (H    llll    I'OWDI'R  TRl'ST 

Tt  is  thcreui)on,  on  this  i.^h  day  of  June  A.  D.  1012.  ordered, 
adjudged  and  decreed  as  follows,   to  wit: 

^  That  the  remaining  twenty-seven  defendants,  namely: 
nizard  Powder  Company,  Lallin  &  Rand  Powder  Company, 
l-  Intern  Dynamite  Company.  Fairmont  Powder  Company.  Judson 
|iynamite'&  Pow.lcr  Company.  Delaware  Securities  Company, 
D'ehiware  Ii.yc^^tm.'nt  Company,  California  Investment  (  ompany, 
l-  1  duPont  de  Nemours  &  Company  of  IVnnsylvai.ia,  duPont 
International  I'owder  Company.  E.  I.  duPont  de  Xemour.  Powder 
Cnnii.any  K.  I.  duPont  de  Nemours  eS:  Company.  I  honias  Coleman 
.JuPont. 'Pierre  S.  duPont.  Alexi>  I.  duPont,  AUre.l  I.  duPont, 
Ku-ene  duPont.  Eugene  E.  duPont.  Henry  V.  duPont  Irenee 
duPont.  Francis  E  duP.mt,  Victor  duPont.  Jr..  Jonathan  A.  na>ke.i. 

\rthur  J,  Moxham.  Hamilton  >E  l?ark<dale.  Edmund  C.  Buckner 
,111(1  I- rank  E.  Connable,  are  maintaiivng  a  coml)ination  in  re>traint 
,,1  interstate  commerce  in  powder  and  other  exiiloMves  in  violation 
,,|  section  I.  of  an  Act  entitled  'An  .\ct  to  I'rotect  I  rade  an( 
Conmierceag.unst  Enlawful  Restraints  and  Monopuli.s,  .ipprove,! 
Inly  2,  iSqoi  and  have  attempted  to  monopolize  and  have  mon..po- 
ii  -rd  a  liart  of  such  commerce  in  violati(«ii  of  section  2  ot  said  Ai  t. 
Wherelori .  It  is  further  ordered,  adjudged  and  decreed  tluit  the 
twenty-sevin  (27)  defend.ints  above  mentioned,  and  each  of  them 
be  enjoined  from  continuing;  said  combiiuition  ,ind  monopoly, 
.ind  th.it  said  combination  .md  monopoly  t>e  di-^oUtd.  _    _ 

^  That  the  petitioner  iiaving  availed  itself  nt  the  permissu.n 
iiranted  in  said  int(  riot  utorv  decree  and  having  present. d  .1  certain 
pi, in  lor  the  diss,>luti..n  of  s.iid  ( oinbin.ition  and  the  dis-olution  of 

'  Thr  r„ilnl  .S-/.(/.T  of  \mrni,i  v.  E  I.  dul'o'tl  (/<•  .V' w.-xr?  ir  Gw/^.ni.v  *J«(i 
.>•  r  In  llu-  I)i~lri.'  (•..uri  of  the  rnilo.l  St.itrs,  (or  the  DiMriet  of  Dcla- 
w.irc  in  Lquity  .No.  280,  Opinion  of  t:ourl  ,oi.l  iin.i!  Dc.nv,  i.;>.  i-ij. 


l! 


i'iil 


m 


4''4 


Industrial  t'oMiiiNATio.ss  and  Tklsts 


said  mono])oly,  ~.i  far  as  tlu'  jiri'sent  .situation  of  the  parties  and 
the  properties  invoUed  will  permit,  to  which  plan  the  said  twenty- 
sevc-n  (jy)  defendants  do  not  object,  which  said  plan  is  as  follows: 

First:  Dissolve  the  defendant  corporation  E.  I.  duPont  de 
Nemours  iS:  Coni])any  (kjoj,  Delaware  cor[)oration)  and  distribute 
its  projierty  anioni;  its  stockholders. 

Second:  Dissolve  the  defendant  corporation  Hazard  Powder 
Company  and  distribute  its  ])roi)erty  amon^  its  stockholders. 

'i'hird:  Dissolve  the  defendant  corporation  Delaware  Securities 
Companv  and  di^triitute  its  pro])erty  anions  its  >tockhol(lers. 

Fourth:  Di^-ol\e  the  defendant  cor])oration  Delaware  In\'est- 
ment  Comj)any  and  distribute  its  property  amon^;  its  stockholders. 

Fifth:  DisM)lve  the  ilefendant  corporation  Eastern  Dynamite 
Companv  and  distribute  its  ])roperty  among  its  stockholders. 

Sixth:  Di-solve  the  detVndant  corporations  California  Invest- 
ment Company  and  Judson  Dynamite  and  Powder  Company  and 
distribute  their  prt)])erty  amoni;  their  stockholdirs. 

Seventh:  Organize  two  corporations  in  addition  to  E.  L  duPont 
de  Nemours  Powder  Company  doo.^  .\ew  Jersey  Corporation) 
which  shall  be  capitaii/.ed  as  hereinafter  ])ro\i(k(l,  or  reorgani/e 
the  Lathn  and  Rand  Powder  Company  and  thi'  Ea--tern  Dynamite 
Company,  or  either  of  them,  to  be  u-cd  in-tead  of  one  or  l)olh  of 
said  two  cor])orations,  d\u\  in  c,i-c  the  >.dd  i'.istcrn  Dynamite 
Company  is  so  selected,  then  it  nee<i  not  be  (li--ol\i'd  a^  herein- 
before ]iro\-ide(I.  !n  lase  tlie  Ealhn  .md  Rand  Powder  Company 
i-  not  Used  under  this  p.iragraph  dissolve  ^aid  company  and  dis- 
tribute its  property  amonj;  its  stockholders. 

To  the  tir-t  of  -a'uI  corporations  transfer  the  folK'wing  plants: 

For  the  MiDtuf.ii  lim    of  Dynamite: 

Plant  .it  KerAille.  New  Jersey, 
Plant  ,it  M,in|U('tte,  .Michij^an, 
Plant  at   I'iiiole,  California. 

For  till  Mdiiiif,!,  liiii'  of  Blark  Blasting  Pmaler: 

I'lant  at  Roseiuhde,  New  \'ork. 

Two  {:•)  plants  at  Riiif^town,  Pennsvlvaniu, 

IMant  at  Youn^stown,  Oliio, 

Plant  at  IMe.isant  I'rairie,  Wisconsin, 

Plant  at   I'urek,  Kansas. 

PI  lilt  at  Santa  Cru/,  California. 


Methods  of  I)issoluti()N 


465 


/•",.r  //;/■  }faiu(fiiftiirc  <\(  Black  Sporlin\i  Pondfr: 

Plant  at  Ha/.ardvil'.c,  C>)nnfCticut. 
rianl  at  Schaghtici.kc,  New  York. 

To  the  second  of  said  corpeiration.,  transfer  the  following  planlb: 

ior  the  Manufditurc  oi  Dyndmik: 

Plant  at  Hopatcitn^.  Xew  Jer.-ey, 
Plant  at  Scnter.  Michigan, 
Plant  at  Atla>.  Mi--ouri, 
Plant  at  Vigoril,  California. 

I'or  the  Maniifiutnrc  of  BUuk  Bldstini;  Povder: 

Plant  at  Riker.  Pennsylvania, 
IMant  at  Shenandoah,  Pennsylvania, 
Plant  al  Ooltewah.  'I'ennesscc, 
Plant  at  iielleville,  Illinois, 
I'lant  at  Pittsburg,  Ran.-as. 

And  permit  the  said  defendant  K.  1.  duPont  de  Nemours  Powder, 
('onipan>   lo  retain  the  following  plants: 

l-'or  Ihr  MiDuifihliirr  oj  Dynavdk: 

Plant  at  Ashhurn,  Missouri, 
Plant  at  Ikirksdale.  Wisconsin, 
Plant  at  duPont,  Washington, 
Plant  at  I'".nii)oriuni,  Penn'-ylvania, 
Plant  .It  Hartford  City,  Indiana. 
Plant  at  l.ouvier-.  Colorado, 
Plant  ,it  C.iM'-tnwn,  New  Jersey, 
Plant  .it  Lewi-hurg,  Al.dunna. 


l-'or   Ihr    MdiUtUiiturr   , 


t    nid.k   HL'^linii  P.n.dir: 


ri.int  .it  Augu>ta,  Color.ido, 

I'lant  at  Connahle,  Al.d>.ini.i, 

Plant  at  Oliphant  I'urn.ue,  Penn-ylv.mia. 

Pl.int  at  Moo.ir,  I.>wa, 

Pi. mi  .it  Ni  rnour>,  W  est  \  irgmia, 

Pl.mt  .it  Patterson,  Oklahoma, 

Pl.int  .It  Wilpin.  ?\linnev..ta. 


466 


Industriai.  Combination's  and  Trusts 


For  till  Manufacturr  of  Black  Sportiui]  Pm^dcr: 
rianl  at  Hrandywinc,  Delaware, 
IManl  at  Wayne,  New  Jersey. 

i'or  the  Mtuiiiiadurt  o!  Smokdtss  Sporting  Powder: 
I'lant  at  ("ariit)'-  i'oiiit.  New  Jersey, 
Plant  at  Ha-kLll.  New  Jer-ry. 

For  the  Mdnittaiture  of  Guxrrnment  Smokeless  Powder: 
Plant  at  Carney's  P<nnt,  New  Jersey, 
Plant  at  Haskell,  New  Jersey. 

Eighth:  rran>UT  to  or  !'urni>h  the  tir-t  nf  -aid  two  corporations 
with  a  plant  for  the  manufaeture  ol  smokeless  s[)ortins  powder  aiu! 
the  brand''  now  or  hrretoft)re  owned  by  the  Latlin  and  Rand  Powder 
Company.  Sui  h  ]  il.int  to  he  located  at  Kenville,  New  Jersey,  or  some 
other  suitable  Eastern  point.  ;ind  to  be  of  a  cajtacity  sufli'-icnt  to 
manufacture  050,000  pound-  per  aimum  of  smokeless  -^[jorting  pow- 
der ol  the  brand-  to  be  as^i^ned  to  \\\c  tir-t  of  saiil  corporations. 

Ninth:  I'urni-h  -aid  two  corporation-  ri-])ecti\ely  with  suOicient 
•working  ( .ipit.al  and  the  necessary  cash  and  facilities  to  enable  them 
to  elTicivntly  carry  on  the  bu>iness  which  will  attend  the  ])ro])ertie.- 
so  to  be  tran-firreil  to  them. 

Tenth:  Tran-fer  said  jiroperties  to  said  two  corporations  re- 
specti\ely  upon  a  valuatitm  thereof  based  on  the  la^t  inventory  of 
i^aid  pro|)erties,  to  include  a  fair  \aluation  for  brands  and  good  will. 
;ind  i--ui'  to  said  K.  I.  duPont  de  Nemour-  Powder  Comjiany  in 
payment  then-fore  '  securities  of  said  two  coqiorations  rt'si)ecti\i.ly 
at  par  \alue  as  follow--:  Fifty  per  cent,  (;o'  ,'  >  of  -aid  jiurcha-e  jirice 
in  bonds  not  secured  b\'  inorfRage  whiih  -h.ill  bear  iniirc-i  at  the 
rate  of  six  per  cent.  ((/  , )  piT  annum,  pay;ible  if  t.inn  d  liy  the  com- 
pany during  said  year,  or  to  the  extent  thereof  tariud  but  not  other- 
wise; nor  cumulative;  payable  not  le-s  than  tin  years  from  date;  the 
fonn  of  said  bonds  to  be  ajipro\ed  by  the  .\ltt)rni_  '"niicnd  or  tlv' 
Court,  which  Itonds  shall  be  subject  to  call  at  one  hundred  ai'd 
two  (10:);  and  the  other  fifty  per  cent.  (50'^  of  said  punluise  ]irice 
in  the  stock  of  said  two  corporations  respectively,  which  for  the  lime 
being  shall  l)e  their  entire  stock  issues.  I'pon  the  receipt  of  said 
stock  ;ind  boncK  by  K.  I.  duPi  iit  dc  Nemour-  Powder  Comjiany, 
di.^tributc  the  said  stock  and  one-half  of  said  Ixjnds  or  the  proceeds 

'  riui-  ill  original.—  IaI. 


Mkthods  of  Dissolution 


467 


of  the  sale  of  said  bunds  amonp;  the  ■■tn(klii)lder>  cif  F..  I.  (kiPont  cie 
Nemours  Powder  Comininy.  In  the  (irj^ani/aliim  or  reorganization 
of  said  two  corporations  to  whieh  -aid  properties  are  to  lx>  trans- 
ferred, provide  two  issuer  of  -tock  in  said  two  corj)orations  re- 
^l)ectivelv,  one  of  which  shall  have  V(itin<;  jKiwer  and  the  other  ot 
which  sli'all  have  no  voting  power.  So  di-lrihute  said  slocks  anion?,' 
the  stockholders  of  E.  I.  dul'ont  de  Nemours  Powder  Company  that 
any  amounts  thereof  which  upon  said  distribution  shall  go  to  any 
one  of  the  twentv-seven  defendants  hereinbcfo'-e  mentioned  ^hall 
consist  of  one-half  of  '^aid  stock  with  \otinc  power  and  one-half  of 
^aid  stock  without  voting  power,  and  provide  that  upon  the  transfer 
through  death  or  by  will  from  any  one  of  >aid  lwenty--even  de- 
ftndants  of  anv  stock  which  has  no  voting  power,  to  some  person  or 
jiersons  other  than  one  of  said  twenty-seven  defendants  herein,  or 
upon  the  sale  bv  anv  one  of  said  twenty-seven  defendants  of  any 
-lock  which  has' no  voting  power,  to  some  jiern/n  or  persons  other 
than  one  of  said  twentv-seven  defendants  ht  re  in,  or  thiir  re>])ecti\e 
wives  or  children,  said  stock  so  sold  or  transferred  may  be  exchanged 
for  stock  with  voting  iK)wer. 

r.Ieventh:  Transfer  to  said  two  corporation-,  r<'-j)ectively,  so  far 
.;-  practicable,  a  fair  proportion  of  the  bu -ino-  in  e\plo-ives  now  con- 
irolled  by  E.  I.  dul'ont  de  Nemours  Powder  Company  under  time 
contract. 

Twelfth:  During  a  period  of  at  least  five  year,-  furnish  each  ot  said 
two  cor]iorations  re-pectively,  under  such  arrangements  as  may  be 
reasonable,  such  information  from  the  records  of  the  Trade  Ikinau 
maintained  by  E.  \.  duPont  de  Nemours  Powder  Company  as  may 

be  desired.  ,       •  ,  .      <■ 

Thirteenth:  During  a  period  of  at  least  five  yen-  fumi-h  to  each  of 
-aid  two  corjionit ions  such  facilities,  information  and  use  of  organiza- 
tion, as  E.  I.  duPont  de  Ntmours  Powder  Company  may  oiierate  or 
possess  in  refertnce  to  jnircha-e  of  materials,  experimentation,  (li- 
velopment  of  the  art  and  scientitic  research,  as  said  two  corporation 
may  desire  from  time  to  .inie.  in  the  intere-t-  of  iheir  busine-s,  and 
upon  some  reasonable  terms  as  to  the  cost  thereof  to  said  two  cor- 
)iorations.  ,     r.  •    • 

And  said  plan  ha   ing  been  duly  considered  by  the  Court,  it  w 
ordered,  adjudged  ,nid  decreed  iha't  the  -aid  defendants  arc  re-p( . 
tively  directed  to  procet'd  f(.r!ln\ith  loi,irr>  -aid  phin  intotlTe.  1.  and 
it  is  further 

Or:!:!:!!    .:(!!!!(!!".•'.'  a!u!  dicrecd.  th-il  il  -aid  dLlendaiit-  -hall  not 


468 


Inul'striai.  Comhination's  and  Trusts 


h;ivc  curried  said  plai:  into  operation  and  (.-tTfCli-d  ihi-  >anu'  on  or  be- 
tori'  the  tifteenth  day  of  December,  kju,  then  and  in  tb.at  e\ent  an 
injunction  shall  is-ue  out  ol  this  Court  restrainin,^  the  >aid  defendants 
in  paragraph  two  of  this  decree  mentioned  and  each  of  them,  and 
their  agents  and  ^er\■ants  from  thereafter  in  any  manner  \vhat.^oever 
placing  the  products  of  anv  of  the  factories  owned  In'  said  defend- 
ants or  said  combination  into  the  channels  of  interstate  commerce, 
or  such  other  nlief  -hall  be  granted  by  the  appointment  of  a  receiver 
or  otherwise  as  this  Court  may  determine. 

4.  That  should  the  defendants  find  it  impossii)le  to  perfect  the 
details  of  said  [)lan  on  or  before  the  said  tifteenlh  day  of  Diceniber, 
igij,  they  may  ha\e  leave  to  api)ly  to  the  Court  for  further  time  to 
carry  out  said  plan. 

5.  That  until  said  plan  is  carried  into  operation  and  effect,  the 
said  twenty-seven  defendants  hereinbefore  named  in  |)aragraph  two 
of  this  decree,  are.  and  each  of  them  is,  and  the  agents  and  .-ervants 
of  them  are  jointly  and  se\  rally  hereby  enjoined  from  doing  any 
acts  or  act  which  shall  in  any  wise  further  extend  or  enlarge  the  field 
of  o])erations,  or  thi'  i)ower  of  the  afortsaid  combination. 

It  is  further  ordered,  adjudged  and  decreed  that  the  >aid  twenty- 
seven  ( ?7 )  defendants,  their  '-lockholders,  olTicers.  diri'ctors,  servants, 
agents  and  employees  iie  and  they  are  hereby  severally  enjoined  and 
re^t rained  as  follows: 

From  continuing  or  carrying  into  further  elTect  after  said  fifteenth 
day  of  December,  1012,  the  combination  adjudgid  illegal  in  this  suit, 
and  from  entering  into  or  forming  among  themselves  or  with  others 
any  like  comtiinalion  or  con-piracy,  by  any  metho(|  or  device  what- 
soever, the  etTecl  of  which  i-  or  will  be  to  rotraiii  intiTstate  com- 
merce in  i'N])losi\-es  or  to  rt'iiew  the  unlawful  monopoly  of  such  com- 
merce obtained  and  possessed  by  the  defend.uil--  a>  adjudged  herein, 
in  \  iolation  of  "Act  to  Protect  Trade  and  Commerce  Against  Unlaw- 
ful Ke-trai.its  and  Monopolies,"  approved  Julv  2,  iSgo,  and  espe- 
cially: 

I.  liy  causing  the  conveyance  of  the  factories,  jilants,  brands  or 
busines.s  of  either  of  said  tw<i  new  coryioriitions  to  the  other  ccjqx)- 
ration  to  E.  I.  duPont  de  Nemours  Powder  Comyuny  or  vice  versa 
after  the  segregation  of  the  properties  among  -aid  corponitions  -hall 
ha\e  taken  place  a-  herein  provided;  by  iilaiing  the  -to(  k-  of  either 
of  said  corjwrations  in  the  haiub  of  voting  tru-tees  or  (.ontrolling  the 
voting  power  of  such  stocks  by  ;iny  device; 


any  express 


,1; 


Uf^iVViiiV-.    V- 


Methous  of  Dissolution* 


469 


with  one  another  or  with  others  relative  tu  the  control  or  maaagemenl 
(if  liilur  of  said  eor])orati()n'^,  or  the  price  or  tern-i>  of  purchase,  or 
of  sale  of  e\i)losive>  or  rtlativc  to  the  purchase,  sale,  manufacture, 
or  transportation  of  e.\plo:-ivis  which  will  have  the  etlect  oi  restrain- 
ing interstate  commerce;  or  by  making  any  agreement  or  arrange- 
ment of  any  kind  between  said  cori)orations  under  which  trade  or 
liusiness  is  apportioned  between  said  corporations  in  respect  either 
In  custom.ers  or  localitic 

•i.  By  oiTering  or  causing  to  be  offered  or  making  or  causing  to  be 
made  more  favorable  prices  or  terms  of  -ale  for  the  products  manu- 
factured by  them  o-  ■uher  of  ihem  to  the  customers  (_)f  any  rival 
inanufactuur  or  manufacturers  than  they  at  the  same  time  otTer  to 
make  their  established  f.ade,  where  the  purpose  is  to  unfairly  crip[)le 
(ir  drive  out  of  bu>ine>^  >uch  rival  manufacturer  or  manufacturers  or 
utherwise  unlawfully  to  restrain  the  trade  and  commerce  of  the 
I'nited  States  in  any  of  said  pr,»ducts;  provided  that  no  defendant 
i-  enjoined  or  re-trained  from  making  any  price  or  prices  in  the  sale  of 
-aid  products,  or  anv  lliereof,  to  meet'  or  to  compete  with  prices 
made  by  any  other  defendant,  or  by  any  rival  manufacturer;  and 
provided,  further,  that  nothing  in  this  decree  shall  be  taken  in  any 
respect  to  -njoin  or  restrain  fair,  free  and  open  competition. 

4.  Bv  either  of  said  corporaticns  retaining  or  em[4oying  the  same 
ilericaf  force  or  organization,  or  keeping  the  same  ofBce  or  offices 
as  any  other  of  said  corporations. 

5.  Bv  either  of  said  corporations  doing  business  directly  or  in- 
lirectlv  under  a.iv  other  than  its  own  coqjorate  name  or  the  name  of 


ided,  however,  that,  in 


I 

a  -ubsidiarv  corporation  controlled  by  ,^;  ])rovi( 

.a-e  of  a  sul)sidiary  cori)oration,  the  controlling  corporation  shall 

lause  the  products  of  such  subsidiary  corjuiration  which  are  sold  in 

ihe  United  .States  and  be.ir  the  pame  of  thi'  manufacturer  to  bear  alx) 

,1  statement  indicating  the  fact  of  such  control. 

It  is  further  ordered,  adjudged  and  decreed  that  said  defendants 
cancel  and  annul: 

a.  .Agreement  of  October  .\  i<)C2,  betwein  Wiili.im  Barclay  Par- 
-ons,  of  the  City  of  New  York,  and  the  Delaware  Sic  uritie^  Com])any. 
Petitioner's  Record,  Kxhibits,  N'olume  4,  i)age  10X4. 

/i.  .Agreement  of  October  (>,  looj.  between  H.  deB.  Bari^ons  ()f 
1  he  City  of  New  York,  and  the  I )elaware  Securities  Company.  I'eti- 
lioner's  Record,  KAhibit-  Volume  4,  p;ige  njSo. 

c.  Agreement  of  the  second  day  of  October,  1002,  '  etween 
Sthuvler  L.  I'ar-ons,  of  the  City  of  \ew  York,  and  the  Delaware 


470 


Indus TKiAi.  ("(imiuxatioxs  axd  'Frists 


Securities  Company.  IMilioncr's  Record.  Exhibits,  Volume  4, 
paj^c  loSS. 

d.  A  like  and  identical  agreement  made  about  the  same  date 
between  J.  A.  Haskell  and  the  Delaware  Securities  Company,  de- 
scribed in  Petitioner's  Testimony,  ""o'ume  2.  pa,L;e  1012. 

It  is  further  ordered,  adjud^eei  and  decreed  that  durin<^  a  jieriod  of 
five  years  from  the  date  hereof  each  of  said  coqioratiun^,  the  K.  1. 
duPont  de  Nemours  Powder  Com])any  and  -aid  other  two  corpora- 
tions, their  stockholders,  ofTicers,  directors,  agents,  servants  and  em- 
ployees, be  hereby  enjoined  and  restrained  as  follows: 

1.  None  of  said  corporations  shall  have  any  otficer  or  director  who 
is  ;.lso  an  officer  or  director  in  any  other  of  said  corporations. 

2.  None  of  said  cor])orations  shall  employ  the  same  a.^ent  or  a,2;ents 
for  the  sale  in  interstate  commerce  of  explosives  which  mi,i,'hl  be  sold 
in  competition  with  each  other;  provided  that  any  one  of  said  cor- 
porations may  sell  it-  i)roduct>  on  commission  through  a  merchant  or 
dealer  who  is  similarly  emi)l(jyed  b\'  either  or  both  of  said  ct>r[)ora- 
tions. 

3.  None  of  said  coqiorations  shall  directly  or  indirectly  acquire  any 
stock  in  another  of  said  corjwrations  or  purchase  or  ac(|uire  any  of 
the  factories,  ])lants,  brands  or  business  of  such  other  corjxiration. 

ll  is  further  ordered,  adjudged  and  decreed  that  each  and  all  of 
the  individual  defemlants  by  this  decree  adjud.^ed  to  be  enirajied  in 
said  combination,  while  holdinjj  stock  in  -aid  two  coqiorations  and 
K.  I.  duPont  de  Nemours  Powder  Comjiany  or  any  two  thereof  be 
(■njoined  and  restrained  from  at  any  time  within  three  years  from 
the  date  hereof  acquirin;;,  owninj^  or  holding,  directly  or  indirectly, 
any  stock  or  an  lepal  or  equitable  interest  in  any  stock  in  either  of 
said  two  corporation-  to  which  said  properties  shall  be  transferred, 
in  excess  of  the  amount  to  which  he  may  be  entitled  under  '.lie 
provisions  of  the  ])lan  herein  mentioned  when  the  same  shall  have 
i)een  carried  out  a-  projio^ed;  pro\-ided.  however,  that  any  of  said 
individual  di'fendanls  may  notwith^tanding  this  prohibition  acejuire 
from  any  other  or  others  of  >aid  tlefendants,  or  in  case  of  death,  from 
their  estates,  an}'  of  the  stock  held  by  such  other  defendant  or  de- 
fendants in  said  corporations  and  may  acejuire  their  proportions  of 
any  increase  of  stock. 

It  is  further  ordered,  adjudsred  and  decreed  that  any  new  company 
or  companies  organized  for  the  ])urpose  of  takinj^  property  under  the 
provisions  of  this  decree  or  otherwise,  necessary  to  the  carr\in^  out 
of  this  plan.  -Iiall,  after  their  formation  and  by  appropriate'  jiroeeed- 


Mr.THODS  OF  Dissolution 


471 


inL'>.  be  made  ]  artii>  lo  this  cause,  and  subject  to  the  provisions  of 
ihi-  (iccree  and  Ijound  by  the  injunctions  herein  granted. 

It  i>  further  ordered,  adiui!<;ed  and  decreed  that  any  party  hereto 
may  make  ai)i)Hcatiun  to  this  Cuurt  fur  such  orders  and  directions  as 
may  lie  necessary  or  proper  in  relation  lo  the  carr>ing  out  of  such 
plan  and  the  ])rovisions  of  this  decree. 

It  is  further  ordered.  adjud;:cd  and  decreed  that  the  twenty-seven 
(j7)  defendants  hereinabove  mentioned,  do  i)ay  to  the  United  States 
Governmem  it-^  co>t  in  this  cause.  _ 

It  is  further  ordered,  adjudged  and  decreed  that  jurisdiction  ot  this 
cause  is  retained  bv  thi>  Court,  for  the  purjiose  of  making  such  other 
and  further  orders  and  decrees  as  may  become  necessary  for  c:  rrymg 
out  the  plan  herein  set  forth. 

It  is  further  ordered,  adjudged  and  decreed  that  after  the  plan  here- 
inat)ove  mentioned  '-hall  have  been  carried  into  etTect  a  report  shall 
be  made  to  this  Court  for  its  approval,  setting  out  the  manner  in 
which  said  plan  shall  have  been  carried  cmt. 


CHAPTER  XV 

EFFICACY  OF  DISSOLUTION 

NOTE 

The  pronounced  of)[)()^ition  that  developed  upon  the  part  of  the 
independents  to  the  method  of  dissolution  proposed  by  the  American 
Tobacco  Company  led  to  an  intcrestinu  i ontroversy  as  to  the  efficacy 
of  the  method  emT)loyed.  ElTort  has  been  made'to  set  forth  both 
sides  of  the  controversy  and  also  to  have  the  exhibits  show  how 
the  independents  would  have  worked  out  the  dissolution  process. 

At  the  moment  this  book  ^oes  to  the  i)ublishers,  a  controversy  has 
developed  over  the  efficacy  of  the  dissolution  of  the  Standard  Oil 
Company.  As  the  last  exhibit  in  the  chapter  shows,  it  is  alleged  that 
this  dissolution  has  been  merely  a  farce. — Ed. 

Exhibit  i 

RESULTS   OF   THE   TOB.VCCO   DISSOLUTION    PL.\N   AS   CLAIMED  BY   THE 

PETITIO.VERS  ' 

Your  Petitioners  show  unto  the  Court  that  upon  the  adoption  and 
execution  of  this  plan  the  combination  heretofore  adjudged  to  exist 
will  have  been  elTectually  dissolved,  and  out  of  the  elements  hereto- 
fore composing  the  same,  a  new  condition  which  will  be  honesth-  in 
harmony  with  a.id  not  repugnant  'o  the  law,  will  have  been  brought 
about  as  follows: 

The  tin  foil  business  now  done  and  controlled  bv  The  Conley  Foil 
Company  will  be  divided  into  two  companies  having  no  interest 
whatsoever  the  one  in  the  other,  ano  neither  in  a  dominant  position 
with  respect  to  ih-  tin  foil  business. 

The  licorice  buMiKss  now  done  and  controlled  by  MacAndrews  & 
Forbes  Company-  will  be  divided  into  two  companies  with  no  interest 
in  nor  connection  with  each  other,  and  neither  in  a  dominant  position 
in  the  licorice  business. 

^Untted  States  of  Ancrka  v.   The  Ammcan  Tobacco  Company  and  others 
I  olilion  ..f  !lu-  AnuTuan  Tu1,:kto  Co.,  In  the  Circ  uil  Court  of  the  United  States 
for  ttK'  Soulhurn  Distrid  of  .\cw  WirL.  [ip.  .'g-31. 

47-' 


Efficacy  of  Dissolution 


473 


American  Stopic  Company  will  be  dissolved,  and  its  busines:  His- 
inte<,'rat'.d. 

The  business  of  American  Cigar  Company  will  be  disintegrated  and 
it  will  have  no  dominant  position  in  any  branch  of  the  cigar  business. 

The  snulT  business  now  done  and  controlled  by  American  SnutI 
Company  will  be  di\ided  into  three  companies,  American  Snufl 
Company  itself  and  two  other  companies  to  be  organized,  and  none  of 
the  three  will  have  any  interest  in  nor  connection  with  either  of  the 

others. 

The  American  Tobacco  Company,  'hrough  distribution  out  of  its 
^ur[)lus,  will  have  denuded  itsulf  of  any  interest  in,  or  control  over, 
the  tin  foil  business,  the  licorice  business  and  the  snulT  business. 

Tt  will  have  stripped  itself  of  any  interest  in  or  control  over  R.  J. 
Reynolds  Tobacco  Company,  a  company  manufacturing  and  sellmg 
tobacco  in  the  Southern  States. 

It  will  have  completely  severed  all  relations  with  the  Porto 
Rican-American  Tobacco'  Company,  manufacturing  and  selling 
cigarettes  and  cigars  in  Porto  Rico,  and  selling  in  the  Lnited  States 
cigars  manufactured  in   Porto  Rico. 

It  will  have  divested  itself  of  all  interest  in  or  association  with 
British-American  Tobacco  Company,  Limited,  The  Imperial 
Tobacco  Company  (of  Great  Britain  and  Ireland).  Limited. 

1-  will  have  parted  with  all  its  interest  in  United  Cigar  Stores 
Company,  a  company  engaged  in  the  retail  distribution  of  cigars 

and  tobacco. 

The  American  Tobacco  Company  itself,  as  an  operating  company, 
will  be  broken  into  three  companies,  each  mpletely  equipped  for 
the  conduct  of  a  large  tobacco  business,  neither  of  which  %yill  own 
any  interest  in  any  other,  and  neither  of  which  will  be  dominant  in 
the  tobacco  trade,  whether  reference  be  had  to  proportion  of  sales 
in  any  branch  of  'he  business,  or  regard  be  had  to  dominating  own- 
ership of  popular  and  valuable  brands,  or  regard  be  had  to  pur- 
chase of  any  t>T>e  of  leaf  tobacco,  or  regard  be  had  to  any  other 
measure  of  "importance  in  the  tobacco  trade. 

All  covenants  that  prevent  The  American  Tobacco  Company 
from  extending  its  business  abroad,  or  British-American  Tobaccc 
Comnanv.  Limited,  or  Tlie  Imp.'rial  Tobacco  Company  (of  Great 
Ikitain  and  Ireland),  Limited,  from  extending  their  business  in 
the  United  States,  will  ])e  terminated,  and  each  will  be  free  to  en- 
gage in  business  throughout  the  world. 

All  covenants  not  to  cnpatre  in  the  tobacco  business  made  by 


474 


Industrial  Combinations  and   Tkists 


vendors  or  others  will  be  terminated,  leaving  all  free  to  engage  in 
any  branch  of  the  tobacco  busines.-,. 

Thus  the  ])usiness  in  tobacco  and  related  product>  heretofore  con- 
trolled by  The  Amercian  Tobacco  {.'onii)any,  or  by  companies  in 
which  it  owns  a  controUing  or  large  interest,  will  not  only  be  com- 
pletely divorced  from  such  control,  but  will  be  distributed  among 
fourteen  separate  and  independent  companies,  none  of  which  will 
have  any  control  over  or  interest  in  any  other,  and  none  of  which 
will  have  any  preponderating  influence  in  any  branch  of  the  busi- 
ness, either  as  a  manufacturing  company,  a  selling  company,  or 
as  a  purchaser  of  any  ty})e  of  leaf  tobacco. 

Finally,  no  small  group  of  men,  nor  even  the  twenty-nine  indi- 
\  idual  defendants  in  the  aggregate,  will  own  the  control  of  any  of  the 
|)rincipal,  accessory  or  subsidiary  companies  defendant,  and  the 
control  of  Tl  ■  American  Tobacco  Company  itself  and  of  the  new 
companies  to  be  formed  will  be  vested  in  a  body  of  more  than  six 
thousand  stockholders. 


Exhibit 


n  AIM  OF  THE  AMEKICAN  TOBArC'O  COMrANV  WITH  RESPECT  TO  THE 
DIVISION  OF  THE  TOBACCO  BUSINESS  OF  THE  UNITED  STATES  BY 
VOLUME   AND   VALUE  ' 

PcrcDilas^r   in  Percentage 
Volume   (Lbs.  in 

or  Thousands)       Value 

Cir.ARETTES 

American  Tob.  Co o7-ii  Si-^S 

Liggett  &  Meyers 27.82  21.03 

Lorillard  Co ^S-~l  26.02 

Others  never  in  any  way  connected  with 

the  combination 19.80  ig.80 

Smoking  Tobacco 

.\merican  Tob.  Co 33-0'*5  Ao.^x 

Liggett  &  Myers 20.05  1647 

Lorillard  Co 22.82  18.88 

Reynolds  lob.  Co 2.66  2.7 ? 

'Op.  Cit.      IV'iiiion  of  Lhc  .Vmcriian  Tobacco  Company.     E.xhibil  "B", 


Ei'ilCACV    or    DlSSOl.LTION 

Pcrcentaf^t'  in 
Volumr  i  f.lis. 

or  Thousands 
Smoking  Tobacco — Continued. 
Others  never  in  any  way  cuniiected  with 

the  combinaticn 21.^9 

TiAG   Tobacco 

American  Tub.  Co 25.,^: 

l.i'j<j;ett&Mver.. 33-83 

l.orillard  Co 3-73 

Reynolds  Tub.  Co 1S.07 

Others  never  in  any  way  connected  with 

the  combination 10.05 

li.NK  Cut  Tobacco 

\merican  Tob.  Co 0-04 

l.im^ett&Mvers 4i.fti 

LnrillardCo" •  ■  27.80 

Others  never  in  any  way  connecttil  with 

the  combination 20.65 

Cigars 

American  Cigar  Co 6.06 

LorillardCo S-l\ 

American  Slogie  Co ■  i-S'"^ 

Others  never  in  any  way  (onnerted  with 

the  combination 86.64 

Snuff 

\merican  Snuff  Co 32-05 

i  !elme  Company 30-^^ 

Weyman  &  Bruton  ' •  •  29.25 

Others  never  in  any  way  connected  with 

the  combination 7-^2 

biTiLi:  Cigars 

American  Tob.  Co 1 5-43 

l.i<,r'ett  &  Myers 43-7''^ 

l..)rillardCo ,-,  33-«4 

Others  never  in  any  way  connected  with 

the  combination ''-^'5 

1  Thub  in  .iri«iiul.     lllscwhcTt  Wcyman-Brutim.— K 


475 

Pcrcentai^e 

in 

Value 


21.39 

2  2.y8 

37-84 

4.64 

I5-4Q 

10.05 

13-52 
36.20 

29-57 
20.65 


8.  go 

2.SS 

1.58 


86.64 

35-53 
28.95 
27.68 

7.82 

13-41 

38.60 

40-95 

6-95 
d. 


476 


LnDLSIRIAL    CuilBlNAlluNS   AXU     TrUSTS 


ExHiniT  3 

distribution'  of  factoriks  and  i'rincipai.  brands  as  claimed  by 

the  ailercian  kjiiacco  company  ' 
The  American  Tobacco  Company: 


Uurham,  X.  C. 
New  \\)rk, 
Milwauktr,  Wis. 
Danville,  \'a., 
Ballimure, 
New  York, 
BaltimdR', 
Louisville, 
Xt'w  York, 
Baltimore, 
Ricliiv.ond, 
Nashville, 
Richmond, 
Ikooklvn, 
Rei(l>ville,  X.  C. 
Miildlctown.  Ohio, 
Louisville, 


(Hlackwcll's  Durham  Tobacco  Co.) 

(Buller-lUuler,  Inc.i 

(F.  F.  Adams  Tobacco  Co.) 

Danville  Branch — little  cigars, 

Kllis-.\  — little  cigars. 

Duke  Branch. 

Fel.^nrr  Branch. 

Finzer  Branch. 

Kinni'V  15ranch. 

Marhur;;  Branch. 

Mayo  Branch. 

(Xa.-hville  Tol)acco  Works) 

(K.  .\.  I'attirMin   Tobacco  Co.) 

1  ,i,i,  !■     cet  Branch — cigarettes. 

(F.  R.  I'lnn  Tobacco  Co.) 

Sor;i  Bniiuli. 

Xalion.il  Branch. 


Lic.c.ETT  &  Myers  I\)nACCo  Company 


Lisj^ett  &  Myer-. 

(SpauldiuL'  iV  Merrick.) 

.Alien  &  ('.inter  Ik.inch. 

(joim  Bollman  Co.) 

Chicafio  Branch. 

Catlin  Brancli. 

(I'nikerton  Tobacco  Co.) 

Xall  t\:  Williams  Tobacco  Co.)  * 

W.  R.  Irby  Brunch. 

W.  Duke  Sons  &;  Co.  Branch. 

Wilini;vj;ton-A     little  cigars. 

riiiladeli)hia- A     little  cigars. 

Lorillard  factory. 
(S.  Anargyros.) 


St.  Louis, 
ChicaL'o, 
Richmond, 
San  Francisco, 
Chicago, 
St.  Louis, 
Toledo, 
Louisville, 
New  Orleans, 
Durham. 
Wilmington,  Del. 
I'hiladelphia, 
'.  LoRiiiARO  CoMPA^  v: 
Jersey  City, 
New  York, 
'0|>.  lit   IVtition  of  thpAmcrican  Tobacco  Company,     l.xliiiiii  '  I)."  i>y.  4^- 


45- 


'Thus  in  the  original. — Kd. 


M 


EfIICACY    of   DlSStJLLTlUN 
IV  LoRiLLARD  Co:     Contiuuca. 


4; 


Midillelowti,  (Jhii), 
Phila.leli>hia. 
\VilminL;l(i!i,  Del., 
Danville,  \'a. 
I5nii>klyn, 
Hall  ill. (ire, 
J(  r  ey  City,  ) 
Richmcjnd,    \ 


(Luhrman  &  Willjern  Tobacco  Co.) 
I'hiladelphia-li— little  cigars. 
Wilniinst.iii-B  -little  cigars. 
Danville- ii  -  little  cigars, 
reiin  St.— little  cigars. 
Ellis  IJranch-B-  -little  cigars 

(Federal  Cigar  Co.) 


Tin:  Amkkhan  Tobacco  Company  will  have: 
Smoking  Tobacco  Brands: 


Lucky  Strike, 

Tu.xedo, 

Peerless, 

Plug  Tobacco  Brands: 

Bull  Durham, 
I'ive  Brothir.- 
01(1  Fnglish. 

.'\merican  N'avy, 
S(|uare  Deal, 
Spear  Head, 

Ivy, 

Corker, 
Town  Talk, 

Piper  Heid>ieck, 
Standard  Xavy. 

Newsboj', 

Sweet  Caporal, 

Cigarette  Brands: 

Hassan, 

Pall  Mall, 

Lit  ill'  Cigar  Brand: 

Mecca. 

Sweet  Caporal. 

Fine  Cut   Brand: 

Virgin  Leal. 

LiGOETT  &  Mykrs  Tobacco  Company  will  have: 
Smoking  Tobacco  Brands; 
U.  S.  Marine,  King  Bee, 

Sweet  Tii.r.'i\  K^'i  ^^^n, 

Duke's  Mixture,  Velvet. 

Home  Rii'i, 

Plug  Tobacco  Brands: 
<^t;ir.  Horse  Shoe. 

Drummond's  Natural  Leaf, 


II 


nir 


478 


Tndustriai.  Comhinations  and  Tru?;ts 


LlGGi.TT  tV  Mvi  Rs  Toincco  C'o.mi'wv  will  have:-- Continued. 

L'i^'arcttc  Bmnds; 


American  licauly, 

Fatima, 

ricdmont, 

Recruit. 

Sweet  Cuba, 


Little  Cigar  Brand: 
Fine  Cut  Brands: 


P.  LoRiLi-ARH  Company  will  have: 

Smoking  Tobacco  Brands 


In  ion  L-cadcr, 
Sensation, 
Just  Suits, 

("Umax, 

Helmar, 
Murad, 
MoK^il, 

Between  thn  Arts. 

TiRcr, 


Plug  Tobacco  Brand>: 
Cigarette  Brand>: 

Little  Cigar  Brand: 
Fine  Cut  Brands: 

Lxiiinir  4 


Liiperialcs, 
Home  Run, 
King  Bee. 


Sterling. 


iIone->t. 
Polar  licar. 


Planet. 


Turki-^h  Trii[)hie-. 
Egyptian  I  »eiLies. 


Century. 


DisiRiiuriDN  of  pfRCHAsr.s  or   nil  11  Ki.M    Tvrr.s  of  toracco 

WITH    ESTIMATE   OF    AVEIL\GE    AGGREG.VTK    AS   n.AI.Mll)    IIV    THE 

wirRtrw  Ton.\rro  coMrANY  ' 

Tui.  .\MKRirAN  Tobacco  Comp.wv: 

Hurley 

Virginia  and  .Vorth  Carolina 
Seed  Leaf . 
Turkish.  .  .  . 
Dark  VVcsli  rn 


Pounds 

4i,g6().g!;7 
51.295.870 

<),n  j,CH)(; 

2.{;>SS,S(,.S 
iy4.?3.365 


'Op.  Cit.      I'etitiun  of  the  ,\nuTi..in    lobauio  C'omjwny,   E.thibit  "V" 


Efficacy  of  Dissolution 


479 


Lk.c.ftt  I'v  MvFRS  TonACCO  Company: 

liurlcy , 

X'ir^inia  und  North  Carolina 

ScL'd  Leaf 

Turkish 

Dark  Wi-turn 


1'.     LiiRIM.ARl)    CdMI'ANY: 

liLirlfV.  ... 

X'iririiiia  ami  North  Carolina. 


6Q,i63,g4f' 
27.755-411 

5,076,180 
558,011 

3,196.800 


24,074,64,:; 
2,550,007 


Seed  Leaf i(;.<W3-7^<' 

3-974,3^0 

1.446,213 


Turki-h 

Dark  Western . 


I 


K.  J.   Rl.\NCJLlJS    roU.\CCO  CuMl'ANV: 

Hurley 

\'ir^inia  .md  North  Carolina 

Scid  Leat  .  .  

Turki-h.  ...  

Dark  W'  -tern ■  •  ■ 


liKiTisii-.XMi  Kir\N    ToiLvrco  C'iMi'WV,  Li\ini!>: 
\'iru;inia  and  North  Carulina.  .  . 
Other  types 

KsiiMAit:  <ii    T'M  \i.  .\\iK\(.i    Ckdi": 

liuriey 

N'irL'inia  and  North  Carolina.  . 

Dark  Western 

.Seed.  .  . 

Turkish 


5,000,000 
25,000,000 


40,000,000 
10,000,000 


::  00,000, 000 
.'40,000,000 
J  00 ,000,000 
1  So, 000, 000 
()0, 000 ,000 


Lxiiuni   5 

CI  MM   nr    ill!     Al  KiKNl  Y   (.1  M  \<  \\    ' 

Coming  now  to  the  general  features  ,,f  the  plan  as  proposed;  as 
was  said  here  yesterday,  it  is  a  purely  practical  commercial  problem. 

'Oral  ArRuim-nl  of  C.eorR.  W  Wi.kcrsham  on  HcarinR  of  ,\pplirati<>n  for 
.\l)im)val  of  Plan  of  l)isintci;raii..M  in  iho  ease  of  the  I'nilrd  Stales  v.  TheAmrr- 
u„n  Tobacco  ComP'Un:  In  tin-  Circuit  Court  of  the  I  nited  Stales  for  the 
Southern  Uislritl  of  New  York,  i)|).  9-15- 


4<So 


IxursTRiAi,  Combinations  and    Trusis 


I  thouf];ht,  when  the  plan  \va>  before  the  conference,  the  last  time 
that  we  had  a  conference  between  counsel  and  the  court,  that  if 
certain  modifications  were  made  and  certain  features  were  changed 
it  was  getting  along  pretty  nearly  to  a  point  where  your  honors 
would  view  it  with  favor,  and  I  thought  particularly  that  the  dis- 
trilmtion  of  brands,  uijon  which  so  much  stress  and  insistence  was 
Kiid  during  the  trial,  and  the  (Ji.-tributioii  of  the  volume  of  pur- 
chases of  raw  material  by  these  various  companies,  was  very  fairly 
worked  out.  After  that  conference,  thire  came  to  me  representa- 
tives of  various  interests  that  have  ai)peared  before  your  Honors 
to-day  and  yesterday,  and  they  brought  to  my  att'iition  the  same 
considerations  that  they  have  brought  here,  and  I  confess  I  was 
very  much  troubled  by  them.  So  1  turned  to  the  only  authoritative 
source  at  my  disjiosal  for  the  facts  of  the  subject,  namely,  the 
Bureau  of  Corporations  of  the  Department  of  Commerce  and  La- 
bor, and  the  Commissioner  placed  at  my  disposal  one  of  their  ex- 
perts— indeed  the  princip;''  "'pert  in  tliis  tobacco  business,  who 
h.id  himself  prepared  very  '  ,-,  if  not  entirely,  the  report  on  the 

toljacco  industry  which  w.  .t...nlly  pul)Ii-lud  by  that  bureau; 
jind  I  had  a  \'erbal  report  from  hiii.  a  few  days  ago,  and  to-day  only 
have  I  got  hi>  written  report.  It  is  not  formal  enough  yet  to  be 
the  report  of  the  Bureau,  but  it  i>  the  rej)ort  of  a  gentlem.m  of  \-ery 
large  knowledge  and  experience  in  this  t'uld,  a  gentleman  very 
familiar  with  the  bu-ine»,  representing  entirely  the  Government's 
side  in  the  matter,  and  who,  on  behalf  of  the  (Government,  con- 
ducted the  investigation  which  resulted  in  his  report.  I  am  going 
to  tile  that  report  with  the  Court,  because  it  strongly  contirnis  the 
invpression  that  I  had  a.s  to  the  fairness  of  distriijution  of  industries 
in  the  i)lan,  and  it  etlectu.dly  answers  the  suggestions  made  by  the 
so-called  indei)endents  and  dealer^.  I  v.ould  like  to  read  pjrt  "f 
that  report  now,  because  we  have  had  --o  much  on  the  subject. 
Take  the  di.stribution  of  brands.  I'or  the  juirpose  of  showing  ex- 
actly the  nature  of  the  cli^tribuliou  of  the  brands  thi'^  gentleman 
has  prepared,  and  is  to  submit  sejjarately  and  su|)|)lennntal  to 
this  report,  a  statement  showing  the  output  of  each  brand  assigned 
for  the  ditTerent  companies,  the  clas.->  iif  the  product  to  which  it 
belongs,  ami  the  territorial  (listributi(m;  but  he  does  annex  to  his 
jiresent  report  a  summary  of  the  territorial  distributun  of  the 
products: 

"The  general  result,"  he  says,  "of  my  examination  of  the  bra.nds 
and  their  te-ritorial  distribution  was  that  there  seems  to  be  no  ah- 


Efficacy  of  Dissolution 


481 


>(,lutc  separation  of  types  and  classes  of  brands  for  the  different  com- 
panies.    Tlie  method  of  dislrihulion  by  plant  which  has  been  lol- 
l.iwed  has  lesulted  in  tlie  sroupinj;  of  similar  classes  of  brands,  so 
ihal  the  high-gra^ie  ci.n  uette,  ordinary  domestic  cigarette,  granu- 
lated tobaccos,  long-cut  and  plug-cut  tobacco,  fine  cut,  plug  and 
twist  brands  assigned  to  each  cc^mpany  will  not  be  exactly  evenly 
divided.    The  predominance  of  one  company  over  another,  however, 
i>  not  such  as  to  entirely  exclude  one  company  from  encroaching  on 
the  territory  of  another.     To  some  extent  the  predomiiiancc  of  one 
company  over  another,  in  a  particular  line  of  product,  is  necessary 
(.n  account  of  the  very  large  output  of  such  individual  brands.    The 
company,  for  instance,  to  which  Bull  Durham  tobacco  isa.ssigned  <)n 
account'of  the  very  large  preponderance  of  this  brand  in  its  class  will 
obtain  a  preponderant  position  in  the  h-'ghcr-priced  granulated 
business.     The  advantages  are,  however,  oii-et  by  new  brands  dis- 
tributed to  each  of  the  other  concerns,  such  as  'Velvet,'  i'rince 
Albert,'  and  'Our  .Vlvertiser.'    Each  of  these  newer  brands  has  m 
it  the  elements  of  strong  competition,  and  each  seems  fair  to  de- 
\rlop  strength  enoii/n  in  its  own  particular  line  to  make  a  formida- 
ble competitor,     li.  the  low-grade  gr;>nulated  tobaccos  the  Liggett 
&  Myers  concern  have  a  predominating  position  on  account  of  the 
great  inrportance  of  the  Duke's  Mixture  brand,  which  make-  uj) 
nearly  So  per  cent  of  the  low-grade  granulated  tobaccos  produced 
hy  the  combination.    Such  a  distribution,  therefore,  which  shoukl 
give  each  of  the  companies  api)roximately  the  same  projjortion  of 
a  particular  class  of  goods,  is  i)ractically  impossible  as  long  as  par- 
ticular brands  make  up  a  large  proportion  of  a  single  line  of  product. 
"In  plug-cut  tobacco-,  principally  distributed  by  I'.  Lorillard  and 
the  .American  Tobacco  Company,  the  latter  will  hold  a  predom- 
inating position,  but  not  to  the" extent  that  I  had  supjKJsed.     A 
number  of  the  plug-cut  brands  of  the  Lorillard  Comi)any  are  di- 
rectly competitive  with  tho.se  of  the  .\merican  Tobacco  Company, 
which,  as  well  as  those  of  the  former  concern,  have  a  large  sale  in 
New  Kngland,  Pennsylvania,  and  the  Central  Si.ite.-. 

"Long-cut  brands  have  been  assigned  to  all  three  concerns.  It 
can  not  be  said  that  any  one  company  has  local  control  over  this 
class  of  product.  Althi'.ugh  the  LiggeU  &  Myers  output  concerns 
it.self  princiiwllv  with  Chicago  and  its  imme<liate  environmrnt,  it 
has  brands  which  are  strong  competitors  of  the  American,  ami 
which  will  compete  in  almost  all  the  States  directly  with^^the 
American  and  Lorillard  Companies  for  this  class  of  produet." 


il 


43: 


Inuustriat,  Comhinatioxs  and  Trusts 


I  will  not  <^n  through  that ,  but  he  has  reviewed  the  great  distribu- 
tion ol  brands  and  linds  that  in  each  instance,  while  there  is  pre- 
dominance i;iven  to  one  company  which  ha^  a  i)articularly  i)rot"itat)h' 
brand  of  very  lar<,'e  sale,  there  i>  in  cvery  instance  a  certain  competi- 
tive interest  assij^ned  to  one  of  the  >ther  companies,  preventing,' 
what  is  called  a  nior.-jpoly  in  one  tiela  beinc;  gi\en  to  any  one  of 
these  companies,  even  the  one  which  secures  the  very  large  selling 
brand. 

Take  the  purchaser-  of  leaf  tobacco.  He  ha.-  i)re[)ared  a  talile 
which  is  annexed  to  thi-  refiort  -that  i>,  the  companies  have  pre- 
pared it  under  his  direction  ---bowing  tlu'  full  distribution  after 
disintegration. 

'"It  is  apparent  from  this  tabulation  that  no  one  of  the  com[)a- 
nies  will  have  an  exclusive  or  nionopoli-tic  field  in  the  purcha-es 
of  any  one  ty|)e  or  any  one  grade  of  a  type  of  leaf.  In  fact,  the 
.\meriran  Tobac  i  ("oinpany,  the  Liggett  &  Myer>  concern,  the 
l.orillard  Compans,  and  the  li  J.  Reynold-  Tobacco  Comi)any 
will  e.n'h  of  them  be  large  and  important  jiurchasers  of  Hurley 
tobacco.  .\  consideration  of  the  amount  of  purchases  of  ditTerent 
grades  of  Hurley  tobacco  showed,  moreover,  that  these  comjianies 
would  each  purchase  a  very  considerable  amount  of  the  ditferent 
grades,  so  that  no  one  company  can  be  sai<l  to  ha\"  the  held  in  the 
purchase  of  any  leaf  grade  exclusively  to  it-elf.  riure  will  be  not 
onlv  an  increase  in  the  number  of  leaf  buyers  in  thi'  Hurley  market. 
but  al-o  active  competition  t"or  the  same,  or  -imilar  grades.  'I"he 
Southern  Leaf  situation  i-  very  muili  the  -a me  a-  the  Hurley 
situation.  The  .\merican  Tobacco  Comjiany,  the  Liggett  i\:  Myer- 
concern,  and  the  Hrili-h-.\merican  Toliaci  ■  C\)mi)any  will  be  eath 
large  and  imjiortant  purchasers  of  Southern  Leaf  of  practically  the 
same  types  and  grades,  and  no  one  company  will  purchase  a  pre 
ponderating  proportion  of  any  ])articular  group  of  grades  of  this 

^yp^'-  ,         ,  .    , 

"'i'he  same  type  and  grade  of  Southern  Leaf  may  be  u-ed  m  Ine 
manufacture  of  such  tyi)es  of  cigarettes,  in  the  manufacture  of 
granuhited  smoking,  and  in  the  manufacture  of  plug  tobaccos.  It 
is  a  fact,  therefore,  that  though  some  (if  the  concerns  may  not  pur- 
chase leaf  tor  the  same  products  in  supplying  their  needs  for  the 
entire  tuld  of  their  operation-,  they  must  come  into  active  competi- 
tion against  each  otliir. 

"The  .American  Tobacco  Company  will  purch  ise  by  far  the 
larger   proportion   of   the   dark    western    tobaccos.     Neither   the 


Efkicacv  of  Dissolution* 


483 


l.iut^'ctt  &  Myers  nor  the  Lorillard  Company  or  the  R.  J.  Reynolds 
ComiKiny  will  ])urchase  an  appreciable  amount  of  this  ty])e  of  leat'. 
The  tola!  purchases  of  the  American  Tobacco  Company  in  this 
lield  will  amount  to  a1)out  19,000,000  pounds,  while  that  of  the 
.ilher  companies  will  be  only  a  few  millii)n  pounds  annually.  The 
<  .unbination,  however,  is  only  a  small  factor  in  the  western  dark  leaf 
market.  By  far  the  jvreater  proportion  of  {h\>  class  of  product  is 
purchased  for  foreif^m  <,'overnnients.  The  fact  that  the  Arnerican 
Tobacc  •  Company  will  ha\e  no  material  competition  in  this  field 
from  LiRgett  &  flyers  or  V.  Lorillard.  therefore,  does  not  deprive 
the  market  of  a  fair  amount  of  competition. 

'•While  the  American  Tobacco  Comi)any  is  the  only  concern  in 
the  above  proup  that  will  purchase  dark  western  types,  it  -hould  be 
borne  in  mind  that  there  will  be  competition  to  a  certain  extent  with 
the  .\merican  SnatT  Company  and  Bruton  &  Wayman  '  Company 
•md  Ceorfje  W.  Helme  Comi>any,  which  recjuire  this  same  type  of 
leaf  for  tluir  products."' 

I  lav  ^reat  stress  on  that  report  because  it  is  the  report  of  an 
expert'who  i-  unusually  familiar  with  the  subject,  and  who  possesses 
j^reat  knowled.ije  on  the  subject,  and  it  comes  as  the  result  of  an 
hivcstipation  undertaken  for  the  purpose  of  determining,'  and  ad- 
vising me  of  the  attitude  which  I  should  take  with  respect  to  the 
oractical  conmiercial  features  of  this  plan;  and  I  know  of  no  bettir 
,vay  of  securiii'.^  within  a  short  time  for  the  consideration  of  the 
Court  the  commercial  and  economic  facts  by  which  you  must  be 
truided. 


Now.  there  is  one  feature  of  this  combination  which,  in  my 
personal  experience,  ha-  been  the  >ubjecl  of  more  complaints  than 
all  of  the  rest  jnit  tof^ether.  That  is  the  Cnited  Cjsar  Stores 
Company.  The  connection  of  that  orKani/.ation  with  ihis  combina- 
tinn  had' given  the  combination  the  greatest  oi)i;ortunity  to- 1  do 
not  know  that  I  can  say  to  injure,  but  nrtainly  to  harass,  the 
domestic  trade  and  to  incense  a  larger  numb,  r  of  iuoiiie  than  any- 
thing else  they  have  done,  because  thi'y  have  gone  in  and  --eached 
the  poor  corner  dealer,  bought  the  house  over  his  head,  ano  when 
his  lease  came  to  an  end.  instead  of  lii .  being  able  to  renew  it  as 
formerly,  he  finds  that  he  can  not  get  a  renewal  of  the  lease,  that 
i!  has  been  tak.  n  by  the  United  (^iL'ar  Stores  Company.  It  was  the 
'  Thus  in  original.     SlmuM  In  \V.\  iiun-Iiruton.  — Kd. 


4^4 


l.NUUSTKIAL   CuMBINATI(;NS    AND     TRUSTS 


hand  of  the  bif^  trust;  it  reached  out  and  touched  the  little  man 
who  has  nobfMly  to  protect  him.  1  have  on  my  tiles  in  \V'a>hin,f,'ton 
letters — my  tiles  are  full  of  letters  and  complaints  running  down  to 
within  the  last  few  days,  and  I  do  think  if  that  concern  can  he  cut 
loose,  if  as  a  condititm  of  this  plan  your  honors  refjuire  them  to 
Ket  rid,  recjuire  these  defendants  to  ^et  rid  of  their  stock  in  that 
concern,  it  would  do  more  to  make  the  rest  of  the  plan  acceptable 
to  the  people  of  this  country  tlum  anythini:  else  that  could  be  done. 
Of  course  Mr.  Stroock  naturally,  sj)eakin,i;  for  the  United  Cigar 
Stores  Company,  objects  to  that,  because  it  cuts  him  away  from 
that  convenient,  intimate,  and  friendly  relation.^hip  with  the 
sources  of  supply  which  in  the  i)ast  has  been  the  means  of  enabling 
the  company  to  so  prosper.  But  they  have  g(jne  along;  they  are  a 
great  big  organization  to-day.  They  have  something  like  a  thousand 
stores,  or  seven  hundred  or  eight  hundred,  at  least,  scattered 
throughout  the  country,  and  they  have  ample  cajiital,  and,  with 
he  impetus  th;il  they  have  got,  they  arc  the  mo>t  potent  compet- 
itor of  the  small  dealer  in  the  United  Slates.  I  know  they  have 
not  been  adjudged  to  be,  in  specific  language,  an  illegal  conibina- 
tii)n,  but  each  and  every  part  of  this  comb  nation  has  been  adjudged 
bv  this  decree  to  be  illegal.  The  decree  '-  comprehensive  enough  to 
include  them,  if  your  honors  >hall  be  so  advised — comprehensive 
enough  to  empower  your  honors  to  include  them,  just  as  much  as 
any  one  of  the  corporations  or  combinati  )ns  before  you.  Therefore. 
I  say,  it  is  entirely  within  your  honors'  |>ower,  whether  you  choose 
to  exercise  it  or  not,  to  sa\',  as  a  condition  of  thi>  plan:  \'ou  ha\'e  got 
to  get  rid  of  iluni  and  turn  them  loose  so  that  that  concern  will  no 
more  ]vd\v  any  connection  with  the  .American  Tobacco  Comi'.any 
or  with  any  of  the  distributive  companies  or  with  any  of  these 
indi\iduals  who  have  built  u[)  this  combination  through  so  many 
years. 


Efficacy  of  Dissolution 


ExiniuT  6 


48s 


Objections  of  National  Cic.ar  Leaf  Tobacco  Association,  the 
CicAR  Manufacturers'  A;,suciation,  and  the  Inuependent 
FoBACco  Salemen's  Association  10  the  Plan  of  Disinte- 
gration, Filed  by  the  American  Tobacco  Co.  and  Others 
October  16,  iqii  ' 

Louis  I).  Hrandeis,  Felix  IL  Levy,  counsel  for  remonstrants. 

United  States  of  America  dfj^aiiisl  American  Tobacco  Co.  and  others. 

To  the  honorablr  ciraiit  jud'i,cs  sittiiii^   in  the  southern  distriel  of 

Xi-d'  York: 

The  above-named  associations,  in  pur>uance  of  leave  granted 
October  iS,  njii,  re-i)ectlully  submit  herewith  certain  objections 
III  said  plan. 

We  submit  that  the  plan  is  not  in  accordance  with  the  opinion 
..f  the  Supreme  Court  of  the  Uniteil  States  in  this  cause.  The  plan 
if  approved,  would  result  in  legalizing  monopoly  insteacl  of  restoring 
competition.  Its  elTect  upon  the  tobacco  planters,  independent 
tobacco  manufacturers,  the  joboers,  the  retailers,  and  upon  labor 
engaged  in  the  manufacture  of  tobacco  products  would  be  more 
injurious  than  the  continuance  of  the  present  illegal  monopoly. 


Fundamental  Defects. 

There  arc  five  fundamental  defects  in  the  plan,  each  so  serious 
that  it  forms  alone  a  suflficient  ground  for  the  rejection  of  the  plan. 

COMMON    OWNERSHIP. 

First.  The  plan  proposes  to  divide  the  main  properties  of  the 
trust  among  several  corporations  legally  distinct,  l)Ut  to  distriljute 
the  stock  in  th-se  several  corporations  pro  rata  among  common- 
stock  holders  of  Jie  American  Tobacco  Co.  \o  plan  eau  he  effective 
to  restore  crmpclition  whiih  docs  not  include  as  an  essential  condition 
a  provision  I'.ial  the  separate  corporations  or  ses^menls  'dhich  are  to 
carry  fom'ard  the  business  of  the  trust  shall  at  the  outset  jnd  for  a 

'  Ilcarinjj.-.  bcfun;  ihu  Conimittoc  on  Interstate  Commerce  on  the  Conln)!  of 
Con>orations,  Persons,  and  l irms  enfiaKcd  in  Interstate  Comnurt e.  L  nited 
Slates  Senate,  O.'nd  Cong.,  2nd  Sess.  IQII-1912,  l)p.  J'S-^''^- 


4S() 


Indusiriai.  C"(i.\ii;i.\Ari(ixs  and  'I'iu'sis 


limited  period  thereafter,  be  oicned  hy  <;/">n/»/t/y  disliiii !  l,'^(;H/)^  (/  in- 
dividuals.^ 

(ii)  Under  the  proposed  (li>trilnition  of  the  >eeuritie>  of  the 
several  corporations  formed  lo  carry  forward  ttie  husine.-s  of  llie 
trust  as  allejied  competitor^,  competition  l)et\veen  the.-ic  concern^ 
would  of  courM'  Ije  lef^ally  i)o>-il)le,  l.iut  common  owner^-liip  of  the 
stock  would  make  it  certain  that  in  fa(  t  tiiere  N'.ould  he  iat  ka-t 
in  the  immediate  future)  no  real  competition,  'i'his  would  be  so, 
no  matter  how  i^reat  the  number  of  corporations  into  which  the 
business  of  the  trust  were  dividrd.  It  i^  contended  tliat  the  20 
individual  defendants  control  to-day  only  ^(j  piT  cent  of  the  \otin<^ 
power  of  the  American  Tobacco  Co.,  and  that  under  the  i)lan  thty 
will  control  a  smaller  per  cent  of  the  stock  and  votinjj;  power  of  the 
several  3Cf;mcnts  into  which  the  trust  is  to  be  (!i\i(k(l.  But  it  i^ 
obvious  that  a  le.^al  majority  of  the  stock  of  a  corporatinn  i>  ni>t 
essential  to  actual  control.  A  small  minority  may  control;  and  a> 
the  ^ame  individuals  would  at  the  outset  select  the  directors  and 
tlie  otTicers  of  each  of  these  colorable  competitors,  it  is  certain  that 
the  officers  and  the  directors  of  the  several  companies  would  lie 
friendly,  if  not  in  fact  identical. 

(7)1  In  view  of  the  past  affiliations  of  these  stockholders,  no 
rea>onab!c  assurance  of  competition  between  the  MA'eral  ^eJ.;nlent- 
of  the  trust  can  be  had,  unless  each  sej^ment  i-  owned  by  an  en- 
tirely  distinct  ^roup  of  individuals.  Such  owner-hij)  of  -eparate 
corporations  by  distinct  groups  of  indi\iduals  was  the  eomlition 
which  existed  prior  to  tlu'  ille:j;al  combination  which  re.-trained 
competition.  Real  comi)etition  is  not  a  commercial  possil)ility 
unless  that  essential  condition  of  com{)etition  be  restored. 

(c)  The  framing  of  a  plan  for  dividing  amonj;  distinct  groups  of 
individuals  the  stock  of  the  seviral  companies  which  take  over  the 
projierties  of  the  trust  would  ])rescnt  no  serious  difficulties.  The 
i.li\ision  would  be  etTected  by  wtluation  and  allotment  in  a  manner 
similar  to  that  pur^ui'd  when  i)artition  is  made  amoni^  heirs  or  otluT 
tenants  in  connnon  cif  several  ])arcels  of  laud,  whereby  each  person 
is  allotted  in  severalty  a  particular  jiarcel  of  real  estate  fornierl}' 
held  in  commi)n. 

(d)  It  is  essential  that  the  ownership  of  the  stock  in  the  ditTerent 
corporations  which  are  to  carry  forward  the  business  of  the  tru-t 
as  competitors  of  one  another  should  not  merely  be  held  at  the 
outset  by  distinct  groups  of  indl\iduals,  but  that  it  shuuld  be  so 

'  Italics  arc  the  editor's. 


KiFUAcv  (jf  Dissoi.rTiox 


487 


held  for  a  limited  period  ihercailer,  >ay,  for  five  years.  Provision 
-hould  therefore  be  made  proliil)ilin^'  by  injunction  those  who  at 
the  time  of  distriliution  aevjuire  slock  in  any  one  of  the  segment 
corporations  from  accjuiring  stoci<.  (iuring  such  period  in  any  other 
of  the  segments.  This  injunction  should  not  tie  confmed  in  its 
nperation  to  the  2(.)  indi\idual  stockholders  who  are  now  named  as 
defendants.  It  -hould  extend  to  every  stockholder  who  participates 
ill  the  diMribution  under  the  plan.  \o  legal  or  practical  difikulty 
w.iuld  present  itself  in  the  adoption  uf  >uch  a  course.  The  stock- 
holders would  be  made  parties  to  the  proceeding  and  bound  by 
the  decree  in  the  same  manner  that  a  decree  becomes  operative  upon 
a  purchaser  at  a  foreclosure  saU'. 

DdMINAllNC.    CdNC!  R\S. 

Second.  The  plan  provide-  for  a  division  (generally)  among  only 
three  huge  coqiorations  of  nearly  all  of  the  jjroperties  now  held  by 
the  trust.  No  plan  can  be  etTe'ctive  to  restore  competition  which 
(hie-  not  include  as  an  essential  condition  that  no  department  of 
the  tobacco  business  now  conducted  by  the  trust  shall  be  divided 
into  segments  so  large  as  to  prevent  the  indejiendents  engaged  in 
that  branch  of  the  business  from  competing  with  them  under  fair 
conditions. 

Under  the  plan  each  one  of  the  three  or  four  corporations  de-igncd 
lo  carry  forward  the  main  businesses  of  the  trust  would  hold  alone  so 
large  a'  percentage  of  the  whole  business  of  the  country  in  the  re- 
>])ective  departnu'nts  of  the  tobacco  trade  as  to  dominate  the  in- 
dependents engaged  in  that  department  of  the  tobacco  l)usiness, 
whether  as  i)lanters.  manufacturers,  or  dealers,  and  thus  unreason- 
ably re-train  trade.  The  three  or  four  concerns  formed  lo  carry  for- 
ward the  main  buriness  of  the  Toliacco  Trust  would  together  be 
in  a  position  to  crush  the  independents  even  more  etTectually  than 
has  been  done  in  the  past. 

In  determining  how  large  the  .several  segments  into  \yhich  the 
trust's  business  is  to  be  divided,  may  projierly  be.  existing  trade 
conditions  must  be  considered.  The  r|uestion  is  one  that  should  be 
decided  not  by  generalizations,  but  by  reference  to  the  spccilk  com- 
mercial facts  prevailing  in  the  several  departments  of  the  tobacco 
trade.  That  <.uh  of  the  three  or  four  corporations  would  under 
the  proposed  plan  in  fact  dominate  and  could  crush  the  exi-ting 
independents  becomes  clear  when  their  relative  positions  in  the  trade 
is  considered. 


4a6 


LnDUSIRLM,    C'fiilLilN.VliUlsL.    A.\D     iRLSTS 


CIGARF.TTES. 

A.  The  cigarette  business  of  the  trust  is  divided  by  the  plan  amonp; 
three  eoncern>.  It  ?-h()ul{|  be  divided  anidiii,'  at  least  seven  se()arate 
concerns. 

The  American  Tobacco  C\).  would  have  ,i.vi5  peT  cent  in  value 
of  the  whole  cij^arette  business  of  the  country;  the  Lorillard  Co., 
26.02  per  cent;  and  the  Lij^gett  «S:  .M\er>  Co.,  ii.03  per  CLnt.  .Ml 
of  the  independents  to.cjethir  control  only  19.S0  per  cent.  Kach  of 
the  three  companies  amon^  which  the  trust's  cigarette  bu-iness  is 
to  l)e  divided  would  thus  start  with  a  cip;arette  bu-ine.--  .greater  than 
the  aggre<,'ale  bu.~iness  of  all  the  independent-. 

(a)  While  it  is  undesirable  to  place  a  limit  uiuiu  tlu-  si/e  to  which 
a  bu-iness  may  fj;row,  or  to  determine  the  proportion  of  the  whole 
bu-iness  of  the  country  in  any  article  which  may  properly  be  ac- 
quirid  by  one  concern  throu.uh  such  f^rowth.  it  i>  absolutely  neces- 
sary to  take  relative  si/e  into  con.-ideralion  when  it  is  .-ou^ht  to 
restore  competition  which  has  been  suppressed  thruufjh  illef,^d  com- 
bination. 

(/))  Furthermore,  under  the  i')lan  the  di.-^tribution  of  the  brands  of 
cigarettes  is  such  that  each  of  the  three  colorable  competitors  who  are 
to  carry  forward  the  business  of  the  tru-t  will,  as  against  'he  other 
two,  dominate  a  particular  branch  or  market  of  the  cigarette  trade. 

(f)  In  considering  the  jjropriety  of  dividing  the  i)re.-ent  cigarette 
busintsri  of  the  »rust  int'^  more  than  3  units,  it  should  be  noted  that 
this  business  rv.i»iesents  the  ab<oq)tion  into  the  t.  of  iS  separate 
busine-s  concerns,  that  the  cigarettes  now  manutactured  by  the 
trust  are  of  several  tlistinct  classes,  and  that,  accc)rding  to  latest 
information  available,  the  trust  even  now  manufactures  its  cigarettes 
in  7  .-eparatc  factories. 

SMOKING  TOB.\CCO. 

R.  The  -moking-tobacco  business  of  the  trust  is  divided  by  the 
plan  among  4  concerns.  It  should  be  divided  among  at  least  i: 
separate  concerns. 

(a)  The  American  Tc  !)acco  Co.  would,  under  the  plan,  have  40.5? 
per  cent  in  value  of  the  whole  smoking-tobacco  business  of  the  coun 
try;  the  Lorillard  Co.,  iS.SS  per  cent;  and  the  Liggett  iS:  Myers  Co., 
16.47  p<  r  cent;  while  all  the  independents  together  wi)uld  have  only 
2i.:.c)  per  cent.  In  otlnr  words,  the  .American  Tobacco  Co.  would 
alone  luue  a  ^.moking-tobacco  busines:   nearlv  twice  that  ot  all  the 


EkKIlAI  V    OF    DiSSOLL'TIO.V 


4S9 


independents  together.  The  Li/j^ett  &  Myers  Co.  and  tlu  l.oriUard 
Co.  \>-oul(l  each  -tart  wilh  a  >nuikinj.;-toljaeeo  hu-ine>s  nearly  as 
larjie  a>  tlie  a^'i^'rej^ale  hu-iness  of  all  the  independent-. 

(0)  Furthermore,  undrr  the  plan,  the  di>trilmlion  ol  the  brands 
is  such  that  three  of  the  four  edloralile  eon-pi  tilnr-  wiaild,  as  against 
the  others,  dominate  a  particular  hnmeh  or  market  ol  llie  rmoking- 
tohacco  trade. 

(( )  In  con^idurin,!,'  the  propriety  of  in-i^ting  u])on  dividint,'  the 
-nioking-tobacco  business  v)f  the  tru-t  among  a  huge  numbi-r  of 
lorporations,  it  .diould  be  remembered  that  the  smoking-ti)bateo 
i)usiness  now  controlled  by  tlie  tru^t  i>  the  result  of  combining  over 
^]  separate  businesses;  that  the  smoking  toba.co  manufactured  is  of 
-e\eral  distinct  classes:  and  that  at  the  present  time,  and  accord- 
ing to  the  latest  informal!;  11  available,  the  lru>t  mas'ufacturo  its 
smoking  tobacco  in  12  ditterent  factories. 


HI 


PLUG  TOB.ACCO. 

C.  The  plug-tobacco  business  of  the  trust  is  to  be  divided,  by  the 
plan,  among  4  companies.  It  should  be  divided  among  at  least  12 
>eparate  concerns. 

(a)  Liggett  &  Myers  Co.  would  have,  imder  the  i)!an.  .^7.^4  per 
c;  -.t  in  value  of  the  plug-tobacco  Inisiness  of  the  country,  the  Amer- 
iian  Tobacco  Co.  32.i)S  per  cent,  and  the  Kt  ynolds  Tobacco  Co. 
iv4()  per  cent,  as  against  only  lo.cs  per  cent  now  held  l>y  all  the 
aidefHTidents  together.  Liggett  &  Myers  Co.  would  have  a  plug- 
tobacco  bu.-iness  nearly  tv,irc  as  large  as  the  aggregate  liusiness  of 
all  the  independents.  The  American  Tobacco  Co.'s  ])lug-tobacco 
business  would  be  larger  than  the  aggregate  of  all  the  independents, 
and  the  Reynolds  Tobacco  Co.'s  i)lvig-tobacco  business  would  be 
more  than  three-quarters  the  aggregate  business  of  all  the  inde- 
[lendents. 

(b)  Furthermore,  under  the  [)lan.  the  distribution  of  the  brands 
is  such  that  at  lt.a>t  two  of  the  four  conipanies  would,  as  agaiii'^t  the 
others,  dominate  particular  branches  or  markets  of  the  plug-tobacco 
trade. 

(f)  In  considering  the  propriety  of  dividing  the  plug-tobacco 
business  of  the  trust  among  a  larger  numIxT  of  corporations,  it  should 
be  noted  that  the  jiresent  plug-tobacco  business  of  the  trust  is  the 
result  of  combining  at  least  4,^  separate  concerns;  that  plug  tobacco 
manufactured  b\-  the  tru-~t  is  of  several  distinct  classes;  and  that, 


m 


4go 


IxDrsTKrAi.  Combinations  axo  'Irtsts 


accordinR  to  the  kitest  information  available,  the  trust  manufactures 
its  plug  tobacco  in  12  different  factories. 

1.11  TIF    CICARS. 

D.  The  little-cigar  busine->  of  the  iru-t  is  divided,  by  the  plan, 
among  three  concerns.  It  shcjuld  be  divided  among  at  least  seven 
separate  concerns. 

ia)  The  Lorillard  Co.  would,  under  the  plan,  have  40.05  p'T  cent 
in  value  of  the  little-cigar  busineis  of  the  whole  country,  the  Liggett 
&  Myers  Co.  would  have  3.S.69  per  cent,  and  the  American  Tobacco 
Co.  13.41  per  cent,  as  against  only  6.05  per  cent  held  by  the  aggre- 
gate (if  all  the  independents.  That  is,  the  Lorillard  Co.  would  con- 
trol nearly  seven  times  as  much  litlk-cigar  business  as  the  aggregate 
of  ill  the  independents,  the  Liggett  &  .Myers  Co.  over  si.x  times  as 
much,  and  the  American  To})acco  Co.  nearly  twice  as  much. 

(/))  In  considering  the  propriety  of  dividing  the  liltle-cigar  l)usiness 
of  the  trust  among  a  greater  number  of  corporations,  it  should  be 
remembered  that  this  business,  though  largeh'  develojied  by  the 
trust,  rests  upon  a  combination  of  distinct  business  concerns;  that 
the  little  cigars  are  of  several  distinct  qualities,  and  that,  according 
to  the  latest  information  available,  the  trust  now  does  its  little-cigar 
manufacturing  in  <evi'ti  --eparate  factories. 

S.WFF. 

E.  The  snutT-tobacco  business  of  the  trust  is  divided  by  the  plan 
into  three  parts.    It  should  be  divided  among  six  separate  concerns. 

(<;)  The  .American  SnulT  Co.  would,  under  the  ])lan.  have  35. .^j; 
per  cent  in  value  of  the  whole  -nutT  business  of  the  country,  the 
George  \V.  Helme  Co.  2S.i.)>,  per  cent,  and  the  Weyman  &  IJruton 
Co.  J7.6S  |x.T  cent,  as  against  7.S2  f)er  cent  now  controlled  by  ail 
the  indei)endents  together.  That  is.  the  .American  SnutT  Co.  would 
have  a  snutT  business  more  than  fuur  times  as  large  as  the  aggregate 
sniitT  business  of  all  the  in(le[iendents,  and  the  George  \V  Helm  '  Co. 
and  the  Weyman  &  Uruton  -  Co.  a  snuff  business  each  more  than 
three  times  as  large  as  the  aggregate  business  of  all  the  independents. 

(h)  In  considering  ihe  i)roi)riety  of  the  division  of  the  snutT  busi- 
ness of  the  trust  among  a  larger  nimiber  of  concerns,  it  should  be 
borne  in  mind  that  the  present  snulT  business  of  the  trust  is  the  result 
of  combining  jo  'icparate  concerns,  and  that,  according  to  the  lalc'i 
information  available,  it  now  manufactures  snufT  in  more  than  three 
factories. 

' 'I"hu?«  in  oricinal.     Should  l>r  llflnu-. — F.cl. 

•  Thu*  in  <>ri^il^^l      Slmulil  !)<■  \Vi>m;in  Bruton. — VA. 


EiiRA.  V  oi    Dissolution 


491 


LICORUI     TASTK. 

F.  The  licoricc-pasti'  Imsincss  of  the  tru>t  is  divided,  under  the 
plun,  into  twu  ])urts.  It  .should  U  divided  anionj^  at  least  four 
-eparute  concerns. 

The  tru;-t,  throuj^h  the  Mac.\ndre\\>  &  Forbes  Co..  now  controls 
go  per  cent  ol  the  licorice-l)a^te  l)U-ines>  of  ihi'  country.  There  is 
hut  one  independent  manufacturer,  and  until  the  co-^iniencement 
of  this  suit  that  manufacturer  conducted  the  l)usine>s  under  an 
agreement  in  combination  with  the  trust. 

{a)  Under  the  plan  the  trust's  licorice-i)aste  business  is  to  he  di- 
vided amonj;  two  concerns,  so  that  the  MacAndrews  &  Forbes  Co. 
will  retain  about  Oo  \kt  cent  of  the  whole  licorice  paste  business  of 
the  country,  and  the  J.  S.  ^'ounK  Co.  ha\e  about  .?o  per  rent.  Thus 
the  Ma^Andrews  &  Forbes  Co.  will  have  a  hcorice-paste  business  si.x 
times  as  large  as  that  of  the  indejK'ndent  manufacturer,  and  the 
J.  S,  VounjT  Co.  a  business  nearly  three  times  as  larne. 

(/))  In  consideriufi  the  jiropriety  of  dividin.n  the  licorice-paste 
t)U>iness  anions  ii  larger  number  of  concerns,  it  should  be  borne  in 
mind  that  the  pre.'-nt  licorice-paste  business  of  the  trust  is  the  result 
of  combining  si.\  separate  concerns. 

((■)  The  control  by  the  trust  of  the  licorice-jiaste  !)U>ines^  gave  it 

introl  of  the  chewing-tobacco  business,  as  chewing  plug  can  not 
be  made  without  licorice;  and  its  control  of  the  licorice-jKiste  business 
of  the  whole  countr\'  is  fortitu'd  by  its  control  of  the  raw  material, 
licorice  nntt.  The  |)lan  makes  no  provision  for  breaking  the  trust's 
mono|H)ly  of  licorice  root. 

((/)  The  plan  also  omits  to  pro\iile  for  a  cancellation  of  those 

venants  by  which  those  whose  licorice-paste  business  was  ab- 
.irbed  by  the  tru^t  an'  precluded  from  reentering  the  business. 


^H* 


til 


TIN   FOIL 


Cm.  The  tin-foil  business  of  the  trust  is  divided  by  the  plan  into 
two  parts.     It  >houl(l  be  di\ided  among  at  least  tive  sejKirate  con- 

of  the  countr\ 


(ems. 


4gJ 


iNUrSIKIAl.    Ci 'MBINATIONS    AND    'I'rUSTS 


(h)  riic  plan  also  omils  to  provide  for  a  canallati  i  of  those 
covenants  \,y  whiih  those  \vlio:c'  tin-foil  business  was  aosorbcd  by 
ilie  trust  are  precluded  from  reentering  the  business. 

"COlll'LKTELV   KQt.lPPi:D"'  CONCERNS 

Third.  The  plan  pro\icles  that  the  three  companies  among;  ^vhich 
all  the  manufacturing  properties  of  the  trust  are  divided  shall  be 
"each  completely  e(iuip]X'd  for  the  conduct  of  a  large  tobacco  busi- 
ness." No  independent  concern  is  now  "completely  e(|uii)pcd  for 
the  conduct  of  a  large  tobacco  business,"  or  indeed  eomi)letely 
equipped  to  do  any  tobacco  business  covering  all  the  main  branches 
of  the  tobacco  trade.  No  plan  to  restore  competition  can  be  elTecti\  e 
which  does  not  include  as  an  essential  condition  that  the  several 
concerns  which  are  to  carry  forward  the  business  of  the  trust  shall 
be,  at  the  outset,  of  a  character  similar  to  that  of  the  remaining  in- 
dependent concerns.  It  follows  that  any  coqioration  taking  over 
a  i)art  of  the  plug-tobacco  business  or  smoking-tobacco  business  of 
the  trust  shall  not  take  over  any  of  the  cigarette  or  cigar  lui-iness; 
that  a  corporation  taking  over  a  part  of  its  cigarette  business  shall 
not  take  over  any  of  its  smoking-tobacco  business,  plug-tobaceo 
business,  or  cigar  business;  and  that  a  corporation  taking  over  any 
part  of  the  cigar  business  shall  not  take  over  any  of  its  smoking- 
tobacco  business,  plug-tobacco  business,  or  cigarette  business. 

(a)  Under  the  proposed  plan  the  .\merican  Tobacco  Co.  would 
have  a  cigarette  department  with  ^,^15  per  cent  in  value  of  the 
whole  cigarette  business  of  the  country,  a  smoking-tobacco  depart- 
ment with  40.53  per  cent  of  the  whole  smoking-tobacco  business  of 
the  country,  a  [)lug-tobacc{)  department  with  2  2.()8  per  cent  of  the 
whole  plug-tobacco  business  of  the  country,  a  hne-cut-tobacco 
dejiartment  with  i  v.S^  per  cent  of  the  whole  line-cut-tobacco  busi- 
ness of  the  country,  a  cigar  department  with  S.go  per  cent  of  the 
whole  cigar  busine^s  of  the  country,  and  a  little-cigar  department 
with  t.v4i  per  cent  of  the  whole  little-cigar  business  of  the  country. 
In  the  Liggett  &  Meyers  Co.  the  percentages  would  be  21.02  per 
■  ent  in  the  cigarette  department,  16.47  per  cent  in  the  smoking- 
tobacco  dei)artment,  ^7■i'"^  per  cent  in  the  phig-tobacco  department, 
30.26  per  cent  in  the  line-cut-tobacco  department,  and  ^S-^c)  per 
cent  in  the  little-cigar  department.  The  Lorillard  Co.  would  have 
a  cigarette  de|)artment  with  26.03  per  cent,  a  smoking-tobacco 
department  with  iS.SS  per  cent,  a  plug-tobacco  department  with 
4.64  j)er  cent,  a  line-cut-tobacco  department  with  29.57  l^'""  ^'^■"'' 


KmcAcv  or  Di>;':i  rriox 


493 


:i  cigar  r]ci)artment  with  2.88  per  rent,  and  a  liltk-riuMr  ili  [)artnient 
with  40.05  per  cent. 

(h)  The  iinpossil)ility  of  fair  imu'ix  liiiun  between  thr  indipend- 
cnts  and  these  four  comjianies,  into  which  it  is  proposed  to  cHvid'^ 
the  rnanufacturin}:;  business  of  the  tru-t,  is  du?'  to  the  cumulative 
elfoct  of  three  distinct  advantages  which  the  tru.-t  has  secured 
through  its  illegal  combination: 

1.  Ihe  1  irge  percentage  of  the  whole  business  in  any  drpartment 
\'.hieh  each  would  have  as  compared  with  the  inde[)endents. 

2.  The  fact  that  its  business  extends  over  all  departments  of  the 
tobacco  trafle. 

^  The  fact  that  the  trust  holds  and  is  proposing  to  distribute 
among  the  three  Dmpanies  certain  brand.>  which  are  practically 
indispensable  to  the  successful  conduct  of  Ijusiness  by  any  jobber  or 
retailer  of  tobacco. 

Each  comjjany  would  thtrclore  be  enaiiUd,  by  nu;>n^  of  these 
"indispensable  brands,"  to  largely  compel  dealers  to  give  prefer- 
ence to  its  other  products  over  those  of  the  existing  indejiendents. 
It  would  also,  by  use  of  the  huge  profits  derivid  from  those  incUs- 
pensable  brands,  be  enabled  to  crush  these  independents  as  com- 
petitors of  other  departme.ils  of  its  Inisiness. 

(( )  In  considering  the  propriety  of  limiting  the  number  of  de- 
partments of  the  tobacco  business  of  the  trust  which  should  be 
.diolled  under  the  plan  to  any  single  company,  it  should  be  noted 
that  prior  to  the  trust's  illegal  operations  no  one  concern  was  so 
'completely  equipped"  and  tha«  the  present  business  of  the  trust 

the  result  of  combining  and  ..  -orbing  illegally  at  least  250  sep- 
arate concerns;  that  furthermore,  even  to-day,  the  trust  manu- 
factures its  j)roducts  in  at  least  100  dilTerent  factories;  that  in 
none  of  these  does  it  now  manufacture  all  of  the  several  tobacco 
products  whit  h  it  is  proj^osed  to  handle  through  each  of  these  "com- 
pletely equipped  companies";  and  that  also  in  the  selling  of  its 
product  it  employs  sei)arate  salesmen  for  different  classes  of  tobacco 
products. 


IN  I 


.01 


RESTR/MNTS  ON   UNFAIR  COMPETITION. 

Fourth.  rh(  pLm  mntain^  no  j>ro\i>ioii  uiuh  r  "Ahi<  li  the  '-tNcr.il 
corporations  whu  h  are  to  carry  forward  the  nianutai  luring  busi- 
ness of  the  trust  will  be  enjoin"d  from  practicing  iIiom'  nit  tlio(ls  of 
unfair  lomptlition  liy  tnean>  of  whi<  h  tin    trust  has  in  tin    past 


494 


Lndustptm,  ("ombinations  a.\d  Trusts 


overcome  its  coi:  ,  ciitors.  It  is  clear  that  for  a  limited  period  the 
independents  should  have  more  i)rotcction  than  would  ordinarily 
he  necessary  in  trade  where  one  concern  has  not  succeeded  in  ille- 
gally dominating  the  trade.  For  this  reason  it  is  not  -sufficient  that 
the  corporations  carrj-ing  forward  the  business  of  the  trust  Ik  merely 
enjoined  from  a  continuation  of  the  illefial  practices  pursued  by 
the  trust;  they  should  also  be  prohibited  for  a  limited  period — say, 
five  years,  and  such  further  time,  if  any,  as  the  court  may  here- 
after order — aj^ainst  oth^T  practices  not  necessarily  illegal,  but 
which  if  resorted  to  at  the  outlet  would  tend  to  stitle  competition. 
The  plan  should  therefore  include,  among  other  acts  to  be  pro- 
hibited for  such  limited  period,  the  following;: 

(A)  Kach  corporation  which  is  to  carry  forward  any  part  of  the 
manufacturinj^  business  of  the  trust  should  be  restrained — 

( 1 )  From  acquiring  or  holding  stock  or  other  interest  in,  or  under- 
laking  to  exerci>e  any  control  over,  or  making  loans  or  otherwise 
••xtending  credit  to,  any  other  corporation  carrying  f(,.-ward  any 
part  of  the  business  of  the  trust,  except  as  hereinafter  provided. 

(2)  From  ha\ing  any  person  act  as  one  of  its  otTicers  or  directors 
who  is  also  an  otTicer  or  director  in  any  of  the  other  corporations 
carrying  forwartl  any  other  i)art  of  the  business  of  the  trust,  except 
as  hereinafter  provided. 

(t,)  From  coml)ining  in  any  way  with  any  other  corporation 
.  arrying  forward  any  part  of  the  business  of  the  tru  .,  either  in 
purchasing  raw  material  or  suj^plies  or  in  selling  manufactured 
l>roducts  or  otherwise,  or  having  any  joint  or  common  agents  or 
enterprises  in  connection  with  the  purchase  of  raw  materials  or 
supplies  or  the  sale  of  manufactured  products,  or  otherwise. 

(4)  From  making  any  agreement  or  arrangement  of  any  kind 
with  any  corporation  carrying  forward  any  jjart  of  the  business  of 
the  trust  under  which  trade  is  apportioned  in  roped  eitlur  !<■ 
customers  or  localitiis. 

(5)  From  doing  business  directly  or  indirectly  under  any  natiu 
other  than  its  own  coriiorate  name. 

(0)  From  holding  stock  in  or  being  otherwise  interested  in  any 
other  cor])oration,  exce])t  as  hereinafter  provided. 

(7)  From  espionage  on  the  business  of  any  compe'itor  eitlur 
through  bribery  of  any  agent  or  employee  of  such  competitor,  or 
obtaining  information   from   any  United  States  reventie  official. 

(S)  From  giving  away,  selling  at  or  below  the  cost  of  manufac- 
ture and  distribution,  any  of  its  products,  or  adopting  any  otiui 


Efficacy  oi    Dissoiatidx 


495 


nu'thod  of  cutthniat  competition  for  the  purpose  of  (le.-tro\inij  or 
of  ae(|uirin^  the  liusiness  or  trade  of  a  competitor. 

(9)  I'mni  refusiiif^  to  srll  to  any  jobber  any  brand  of  -miff  or 
eis;aretle.-,  or  smol^in.u:  or  chewinLC  tobacco  manufactured  Ijy  it 
which  is  indispen^able  in  the  particular  mari<et.  It  should  al>o  l)e 
retrained  from  S'^'i'ig  ^my  retiates,  allowances,  or  other  .-pecial 
inducements  to  those  who  use  its  jroods  exclusively  or  f,nve  prefer- 
ence to  them  over  the  ^oods  of  competitors. 

(10)  Xo  corp(.)ration  carrying  forward  any  part  of  the  manufac- 
turing business  of  the  trust  should  be  allowetl  to  hold  any  i)a.t  of 
the  stock  of  or  any  other  interest  in  any  concern  engaj^ed  in  job- 
bing tobacco  products;  but  it  should  be  permitted,  except  as  abo\  e 

iated,  to  own  the  sto':k  of  another  corpt)ration  organized  to  carry 
on  any  part  of  its  pc-missibk'  business,  provided  such  other  cor- 
poration shall  have  a  corporate  name,  and  the  bu^ine^s  is  done  under 
a  name,  substantially  identical  with  its  own. 

(H)  Each  of  the  2()  individual  defendants,  ai.  1  also  the  other 
^lockholders  among  whom  distribution  of  the  proi)erty  of  the  trust 
is  made,  shoukl  be  restrained  from  doing,  or  aiding  m  the  doing, 
of  any  acts  which  the  corporation--  are  to  be  jirohilM'ted  from  doing 
as  above  set  ft)rth. 

(C)  Every  independent  or  other  person  interested  should  in  the 
event  of  any  alleged  violation  of  the  injunction  have  liberty  to 
.ipply  to  the  court  for  protection  and  such  action  as  may  ap|)ear  to 
be  appropriate. 

UmTED  CIGAR   STORES. 

Fifth.  The  plan  provides  for  leaving  intact  the  United  Cigar 
Stores  Co.  and  miuly  distributing  among  the  comnKin-stoik 
holders  of  the  American  Tobacco  Co.  its  stock  holdings  in  the  I'nitefl 
Cigar  Stores  Co.  No  plan  can  be  etTectivc  io  restore  comjietition 
which  do?s  not  provide  for  dividing  the  businesses  and  property 
of  the  United  Cigar  Stores  Co.  amc.ng  many  separate  concerns 
owned  by  absolutely  distinct  groups  of  individuals.  These  busi- 
nesses should  be  divided,  i)referably  among  at  least  10  separate  cor- 
porations, and  no  one  corporation  .should  be  given  .1  predominant 
power  in  any  locality. 

(^1)  The  power  acriuired  by  the  United  Cigars  '  Stores  Co.  through 
If  illegal  oi)erat'ons  of  the  trust  is  so  great  that  its  continued 
>  .i^jteiice  would  render  eiTective  com[)etition  improbable,  even  if, 
'  Thus  in  uriginal. —  F.d. 


M 


496 


IXDUSTRIAI.    CoVIUNATIONS    AND    TRUSTS 


as  contended  above,  Vac  manufacturing;  properties  were  divided 
into  sejiurate  segments  owned  each  by  distinct  proups  of  indi\id- 
uals.  The  distril)Ution  of  the  United  Citjar  Stores  Co.'s  stock 
among  the  stockholders  of  the  Amirican  Tobacco  Co.  would  in 
itself  create  a  bond  of  union  among  the  several  segments  sought  to 
be  kept  separate  and  di-tinct  each  from  the  other.  In  considering 
the  disposition  to  be  made  of  the  Lnited  Cigar  Stores  Co.,  the  court 
should  be  guided  by  the  actual  commercial  situation,  to  1  "  ascer- 
tained b^  an  inriuiry  into  the  actual  facts.  The  United  Cigar 
Stores  Co.,  developed  through  the  illegal  practices  of  the  trust, 
possesses  to-day  a  capital  and  a  peculiar  position  which  makes  it 
so  potent  in  the  tobacco  l)usine>s  as  to  be  a  menace  alike  to  inde- 
pendent manufacturers  and  to  independent  retailers.  Its  divisimi 
is  a  commercial   nece-^sity. 

(h)  When  divided  each  "segment  of  the  United  Ciear  Stores  Co. 
should  be  owned  by  a  dilTerent  group  of  individuals;  and  like  pro- 
vision should  be  made  as  in  the  case  of  the  segments  of  the  manu- 
facturing properties  of  the  trust— that  for  a  limited  period,  say, 
five  years,  none  of  the  original  stockholders  should  be  allowed  tn 
acquire  an  interest  in  any  of  the  otiur  segment-,  into  which  the 
United  Cigar  Stores  Co.  is  divided. 

(c)  Specific  ])rovision  should  also  be  n^ule  to  prevent,  as  in  the 
case  of  the  manufacturing  companies,  any  comljination  l)et\veen  the 
dilTerent  corporations  formcfl  to  carry  forw  ;rd  the  I'nited  Cigar 
Stores  Co.  business.  They  should  among  other  things  be  expressly 
])re\ented  from  coml)ining  in  any  way  in  purchasing  or  in  selling 
tobacco  products  or  in  purchasing  or  leasing  real  estate,  and 
specifically  from  issuing  interchangeable  coui>ons. 

II. 

Othi  R  Imi'ortant  Dkfects. 

In  addition  to  the  live  fundamental  ol)iections  to  the  plan  set 
forth  abovi',  there  exist  other  important  objections,  among  which 
are  the  following: 

I  III.    I'KITlsH     \MT~RirAN   CO. 

First.  I'nder  the  i>lan  the  t(>\enant  restricting  the  British  Amer 
ican  Tobacco  Co.  from  competing  within  the  United  States  is  to  be 
al)rogated;  but  no  provision  is  made  for  terminating  the  practical 
monoiX)ly  acquired  by  the  British  .\merican  Co.  in  the  purchase 


I-",IFl(A(A    <)}■•    DlSSoi.nioN 


497 


and  manuiacture  wilhin  ihu  Lnilcd  StaUs  for  cxjvirl  of  certain 
kinds  of  tobacco  leaf  and  the  manufacture  of  cigarettes  within  the 
L  nited  States  for  export. 

The  leaf-tobacco  business  of  the  iJrilibh  American  Co.  should  be 
di\ided  among  four  concerns,  taking  over,  respectively,  the  busi- 
nesses heretofore  done  l)y  the  David  I)unlo]>  Co.,  T.  C.  Williams 
Co.,  Cameron  &  Cameron,  and  William  Cameron  &:  ]>ros. 

The  export  cigarette  business  should  be  taken  by  two  companies, 
a->uming,  res|)ectively,  the  business  done  at  the  Richmond  and  th'^ 
Durham  plants.  The  separate  concerns  so  created  should  be  -ub- 
ject  to  prohibitions  similar  to  those  suggested  abo\e  for  the  other 
-egments  of  the  trust,  and  the  provisions  should  be  made  specific- 
ally to  encourage  com[)etition  between  the  cigarette  plants  now 
ennt rolled  by  the  British  .\merican  Ci-  and  those  controlled  by  the 
.\merican  Tobacco  Co. 


ill  ! 


COMPETITION    IN    BfVINC,    TOBACCO. 

Second.  The  plan  fails  to  provide  adequately  for  preventing  a 
restraint  of  competition  in  the  purchase  of  leaf  tobacco  through 
some  combination  between  the  Tniperial  Co.,  the  liritish  .American 
Co.,  and  ihv  segments  into  which  the  .\nierican  Toijacco  Co.  may 
he  (li\i(k'd.  There  should  be  a  s]>eeillc  i)rohil)ition  again>t  the 
Urilish  companies  joining  with  each  other  or  with  any  of  the  -eg- 
nu'nt>  of  the  .\merican  Tobacco  Co.  in  the  purchase  of  leaf  tobacco 
or  in  employing  any  common  agent  fur  that  purpose. 

Tlir,   CIGAR   BUSINESS. 

Third.  Under  the  j)lan  the  .Vmerican  Tobacco  Co.  is  to  retain  in 
its  treasu-y  the  stock  of  the  .American  Cigar  Co.  now  hdd  by  it. 
The  .'\n  .  ican  Cigar  Co.  should  Ix'  Mjiarated  ab.solutely  from  every 
I  her  cori)oration  which  carries  forward  any  part  of  ilic  maiiufac- 
uiriiig  Iju-^inessof  the  trust  in  other  tobacco  pro(hRt,->.  .Ml  the  .Xmer- 
iean  Cigar  Co.  stock  held  by  the  trust  should  be  transferred  to 
some  group  of  individuals  entirely  distinct  from  those  who  hold  the 
stock  in  the  corporations  which  take  over  the  smoking-tobacco, 
plug-tobacco,  snutT,  and  cigarette  business  of  the  trust. 

Itirthermore  the  manufacturing  bu.Mness  of  the  .American  Cigar 
Co.  should  be  divided  among  at  least  four  separate  coqxjrations, 
each  owned  by  a  distinct  group  of  stockholders;  and  each  of  these 
1  oqxtrations  should  be  subject  to  prohibitions  substantially  >im- 


'■'h 


498 


Industrl^l  Combinations  and  Trusts 


ihr  to  those  above  set  forth  in  respect  to  the  other  corporations 
carryinj^  forward  parts  of  the  husint'ss  of  the  trust. 

Leave  is  respectfully  reserved  to  submit  additional  objections 
to  the  plan,  as  well  as  arfjumen  in  sunport  of  all  objections  in  ac- 
cordance with  said  order  entered  October  i8,  iqii. 

I.ouis  D.  Bkandiis, 
Fklix  H.  Levy, 
Counsel  for  Remonstrants. 
New  York,  October  25,  igii. 


ARGUMENT  OF  FELIX  II.  LEVY  IN  SUPrORT  OF  THE  OBJECTIONS  FILED 
HEREIN  BY  THE  N.\TIONAL  CIG.\R  LE.AF  TOBACCO  ASSOCIATION,  THE 
CIGAR  manufacturers'  ASSOCIATION  OF  AMERICA,  AND  THE  IN- 
DEPENDENT TOBACCO  salesmen's  ASSOCIAHON  TO  Tin:  PLAN  OF 
DISINTEGRATION  FILED  HEREIN  B\  I  HE  AilLRICAN  TOBACCO  CO. 
AND   OTHERS,   DEFENDANTS ' 

I.  The  plan  submitted  by  the  tobacco  combination  does  not,  in  any 
substantial  sense,  comply  with  the  re(|uirements  of  the  ojiinion  of 
the  United  States  Supreme  Court   >r  of  the  decree  reii(kre(i  lurein. 

(a)  At  the  outset  it  will  be  useful  for  a  clear  understanding,'  of  the 
requirements  of  the  opinion  of  the  Supreme  Court  to  point  out  a  few 
of  the  salient  features  of  that  opinion  as  indicating  the  character  of 
dissolution  contem])latfd  liy  that  court. 

It  is  a  significant  fad  that  the  court  deenuil  it  unnecessary  to 
take  into  consideration  any  of  the  numerous  facts  in  the  record  which 
were  disputed  by  the  defendants.    The  court  said  (p.  155): 

•'*  *  *  in  our  ()])inion  the  case  can  be  disposed  of  by  consid- 
ering only  those  facts  which  are  indisputable  and  by  applying  to  the 
inferences  i)roperIy  deduciblc  from  such  facts  the  meaning  and  etTect 
of  the  law  as  expounded  m  accordance  with  the  previous  decisions 
of  this  court," 
and  again  (p.  157), 

"*     *     *     we  propose  only  to  deal  with  facts  which  are  not  in  con- 
troversy.'' 

Desp'ite  the  fact  that  the  court  limited  itst  ll  ti>  the  consideration  of 

'  Hearing  hiforc  the  Committee  on  Interstat'^  Commerce,  United  States 
Senate,  bind  Congress,  ind  Scss.,  191 1   1912,  pp.  j.0-50. 


Effica*  V  <n-  Dissolution' 


499 


thi'  undispuud  facts  only  the  court  '^dw  jud},'ment  of  dissolution  and 
disintegration  of  u  mo-t  dra-lic  character. 

[b)  The  court  rccojznized  the  fact  that  a  suh-tantial  control  of  the 
combination  was  exercised  1  )>■  a  very  -nia!l  inmiher  of  it>  stockholder-. 
.\t  pacje  174  the  cxiurt  said: 

'■'riirou^di  the  nii'lhod  of  dislril'Vition  of  the  stock  of  the  new  coni- 
pany.  in  c^xchantie  for  shares  in  the  old  American  and  in  the  Con- 
tinental Co.,  it  resulted  that  the  same  six  men  in  control  of  the 
combination  through  the  Consolidated  Tobacco  Co.  continued  that 
control  by  ownershi])  of  stock  in  the  merged  or  new  American  To- 
bacco Co".  *  *  *  The  record  indisputably  discloses  that  after  this 
merger  the  same  methods  \^hich  were  used  from  the  beginning  con- 
tinued to  be  employed. " 

.\nd  it  also  recognized  the  nece-sity  of  a  comi)lete  divesting  of  stock 
ownership  by  one  part  i)f  the  combination  in  other  parts  of  the  com- 
bination, as  is  thus  shown  (p.  170): 

"Thus,  even  if  the  ownership  of  stock  by  the  .\merican  Tobacco 
Co.  in  the  accessory  and  subsidian,-  comi)anies  and  the  ownership  of 
stock  in  anv  of  those  comi>imies'among  themselves  were  held,  as 
was  decided'in  United  States  against  Standard  Oil  Co..  to  lie  a  viola- 
tion of  the  act,  and  all  relations  resulting  from  such  stock  ownership 
were  therefore  set  aside,  the  (luestion  would  yet  remain  whether  the 
jirincipal  defendant,  the  American  Tobacco  Co.,  and  the  five  acces- 
sory defendants,  even  when  divested  of  their  stock  ownership  in  other 
corporations,  bv  virtue  of  the  power  which  they  would  continue  to 
pos';f>;s,  even  al'though  thus  stripped,  would  amount  to  a  violation  of 
both  the  first  and  second  sections  of  the  act.  *  *  *  Still  further. 
t  he  question  would  vet  remain  whether  particular  coqiorations  which. 
vAwn  bereft  of  the' power  which  they  possessed,  as  resulting  from 
-lock  ownersl-.ip,  although  they  were  not  inherently  possessed  of  a 
sutTicient  residuum  of  power  to  cause  them  to  be  in  and  of  themsehes 
(ither  a  restraint  of  trade  or  a  monoiiolizaUon  or  an  attempt  to 
monopolize,  should  nevertheless  be  restrained  because  of  their  in- 
timate connection  and  association  with  other  corporations  found  to 
be  within  the  prohibitions  of  the  act." 


> 

i 

■ 

i          5 

! 

(e)  The  court  clearly  recognized  the  necessity  of  a  separation  of 

stock  control,  as  is  thus  shown  (p.  1S5): 
"Lookini;  at  the  situation  as  wc  have  hit i^^r!,.  point-.!  it  out.it  m- 


500 


Industrial  Combinations  \nd  Trusts 


volvcs  difficulties  in  the  application  nl  remedies  greater  ;han  have 
been  presented  by  any  case  involvin.i,'  the  antitrust  act  which  has 
been  hitherto  considered  by  this  court:  I'lr^t,  because  in  thi.>  case  it 
is  obvious  that  a  mere  decree  forbidding  stock  ownership  by  one  part 
of  the  combination  in  another  part  or  entity  thereof  would  alTord  no 
a(Uf|uate  measure  of  relief,  since  different  ingredients  of  the  combina- 
tion would  remain  unalTected,  and  by  the  very  nature  and  character 
of  their  organization  would  be  able  to  continue  the  wrongful  situation, 
which  it  is  our  duty  to  destroy.  *  *  *  Third,  because  the 
methods  devised  by  which  the  various  essential  elements  to  the  suc- 
cessful oper;ition  of  the  tobacco  business  from  any  particular  asjK'ct 
ha\ e  beer,  so  separated  under  \arious  subordinate  combinations,  yet 
so  unified  })y  way  of  the  control  worked  out  by  the  scheme  here 
condemned,  are  so  involved  that  an  •  specilic  form  or  relief 
which  we  might  now  order  in  substance  .'ud  etlect  might  operate 
really  to  injure  the  public  and,  it  may  be,  to  per])etuate  the 
wrong. ' ' 

It  is  thus  made  obvious  that  one  of  the  princii)al  features  com- 
prised in  the  objections  filed  by  the  remonstrant<~that  which  ob- 
jects to  stock  ownership  by  the  stockholders  of  any  one  of  the  seg- 
ments into  which  the  combination  shall  be  divided  in  any  of  the  other 
segments — was  contemplated  by  the  court,  and,  apparently,  the  only 
objection  thereto  was  that  such  prohibition  would  not  go  far  enough. 
To  enij)hasi/e  this,  wc  repeat  the  language  of  the  court: 

■'*  *  *  In  this  ca.se  it  is  obvious  that  a  mere  decree  forbidding 
stock  ownership  by  one  part  of  the  combination  in  another  part,  or 
eniily  thereof,  would  afford  no  adequate  measure  of  relief." 

There  is  here  no  suggestion  of  the  illegality  of  such  a  prohibition. 
The  court  says  only  that  it  will  not  go  far  enough. 

The  danger  of  a  renewal  of  an  unilied  control  through  such  stock 
ownership  is  clearly  apiirehcntied  by  the  court  as  shown  1)\-  the  word.- 
used  above,  which  we  here  again  quote  (p.  iS6): 

"*  *  *  Because  the  methods  devised  by  which  the  various  es- 
si'ntial  elements  to  the  successful  ojjeration  of  the  tobacco  business 
from  any  particular  asjxct  ha\e  been  so  separated  under  various 
subordinate  combinations,  yet  so  unified  by  way  of  the  control 
worked  t)ut  by  the  .schi  me  here  condemned."  etc. 

{ /)  It  seems  obvious  that  the  court  b.ad  in  mind  the  probabililv 
that  a  receiver^hi])  or  an  injunction  against  the  movement  in  inter- 
-state  commerce  of  the  proijucts  of  the  combination  would  be  neces- 


Kkfuacn   ok   Dissoi.inox 


501 


conspirators  who  controlled  the  combination.  The  court  makes 
clear  the  [-.(/^sible  necessity  of  such  a  procedure,  and  il>  unwillin^'ness 
to  resort  thereto  forthwith,  without  lirst  f^ivin^  the  controllers  of  the 
com])ination  an  opportunity  to  formulate  and  pre>ent  to  this  court  a 
plan  of  dissolution  and  disintegration  which  wonUl  honestly  conform 
with  the  reciuirements  of  the  statute.    The  court  said  (p.  187): 

"But,  ha\inK  regard  to  the  principles  which  we  have  --aid  mu>t 
control  our  action,  we  do  not  think  we  can  now  direct  the  inmiediate 
ai)plication  of  either  of  these  remedies.  We  so  consider  as  to  the  first 
because,  in  view  of  the  extent  of  the  cnmbination,  the  vast  tield  which 
it  covers,  the  all-embracing  character  of  its  activities  concerning  to- 
bacco and  its  products,  to  at  once  stay  the  movement  in  interstate 
commerce  of  the  prorlucts  which  the  combination  or  its  co-operating 
forces  produce  or  ccjntro!  might  inflict  intuiite  injury  upon  the  ])ub- 
lic,"  etc.  *  *  *  "The  second  because  the  extensive  power  which 
would  result  from  at  once  resorting  to  a  receivership  might  not  only 
do  grievous  injury  to  the  public,"  etc. 

It  thus  appear^' that  in^tead  of  resorting  forthwith  to  either  of  these 
drastic  remedies,  the  court  gave  to  the  defendants  the  opportunity 
of  working  out  some  plan  of  dissolution  and  disintegration  which 
would  conform  to  the  requirements  of  the  decree  and  adequately 
meet  the  situation;  and  failing  so  to  do,  resort  to  one  or  the  other  or 
both  of  these  remedies  would  Ijccome  necessary.  The  insistence  ujxjn 
a  diversity  of  stock  ownership  is  based  not  upon  any  claim  of  the 
right  of  this  court  to  enforce  such  condition  upon  the  stockholders 
against  their  will,  but  is  based  upon  the  contention  that  unless  the 
stockholders  of  their  own  free  will  and  accord  ])resent  to  the  court, 
as  a  y)art  of  their  plan  of  dissolution  and  disintegration,  a  provision 
[)reventing  mutuality  of  stock  owner>hij),  the  defendants  will  mA 
have  met  the  rer|uirements  of  the  o]iportunily  thus  given  to  them  by 
the  Supreme  Court.  In  other  words,  the  Suiireme  Court  has,  if  we 
may  be  permitted  to  jjaraphrase  its  language,  said  in  effect  to  these 
defendants: 

"VVt'  hisitate  to  appoint  forthwith  a  n-'eixcr  and  to  issue  an  in- 
junction against  interstate  tralTic  in  your  products  because  of  the 
injur\-  that  will  thereby  be  occa^ione(l  to  the  public.  We  therefore 
give  you  an  i)pportunity  of  working  out  and  presenting  to  the  circuit 
court  a  plan  of  dissolution  and  diMntetrralion  which  will  honestly 
re-create  conditions  of  free  and  unrotricled  competition,  li  you  are 
unable  or  unwilling  to  do  this,  there  will  be  no  alternative  open  except 
the  appointment  of  a  receiver  or  the  i->uance  of  such  an  injunction. 


>02 


InDISIKIAI,    (MMIilNAIIONs    AND     TkLSTS 


It  will  Ihcn-foro  l)i.'  necosary  for  you  to  devise  a  plan  to  which  your 
security  holders  will  of  their  own  accord  consent  whereby  the  true 
intent  and  i)urj)ose  of  our  decree  will  be  carried  out.  If  such  a  plan 
shall  necessitate  your  security  holders  j)lacin^  theni.-elves  under  a 
prohibition  a<:;ainst  mutual  or  joint-stock  ownershif)  of  the  various 
se.uments  into  which  your  conit)ination  -hall  be  divided,  then  that 
niu>l  be  done.  While  it  may  be  that  a  court  can  not  compel  you  to 
do  this,  nevertheless  unless  you  consent,  no  etTective  restoration  of 
real  compeliti\e  conditions  can  be  brou^dit  about  and  accordingly  it 
would  become  necessary  fur  the  court  to  appoint  a  receiver  ur  to  issue 
an  injuncliuu." 


II.  The  court  ha.-  power  to  enjoin  the  [lurcha.-e,  directly  or  indirectly, 
by  the  29  individual  defendants  and  their  confederates,  of  the  stock 
of  the  constituent  comi)anie.-. 

We  protest  against  any  method  of  distril)Ution  by  which  the  stock 
of  the  constituent  comjianies  will  be  placed  in  the  hands  of  the 
common-stock  holders  of  the  American  Tobacco  ("o.  The  .\nurican 
Tobacco  Co.  must,  it  is  true,  dispose  of  its  holdin,L;>  in  the  shares  of 
the  constituent  companies,  but  it  shoukl  not  be  allowed  to  di.-lribute 
those  shares  amonj,'  its  own  conmv -i-stock  hi  ilders.  On  the  contrar}-, 
an  injunction  should  issue  restraming  the  common-stock  holders  of 
the  .\merican  Tobacco  Co.  from  ac(|uirin>^  those  shares.  Such  an 
injunction  involve.-  no  violation  of  any  le^'al  ])rinciple.  It  merely 
enjoins  the  i)erpetuation  of  a  criminal  conspirac\-  under  another 
form. 

An  analysis  of  the  situation  must,  we  think,  sustain  the  correctness 
t)f  this  view.  These  29  individual  defendants  combined  with  the 
.American  Tobacco  Co.,  or  combined  with  each  other,  by  and  through 
the  corporate  form  of  the  American  Tobacco  Co.,  to  monopolize 
trade  and  suppress  competition  by  centrali/inp;  under  one  control 
the  business  of  jireviou-  diverse  units.  To  etTectuate  that  end  they 
adoi)ted  the  i)lan  of  putting  the  stock  of  the  units  into  the  owner.shij) 
of  the  dominant  corporation.  They  might  have  adopted  other 
methods,  and  if  the  end  which  they  had  in  view  had  been  the  same, 
the  illegality  would  have  been  in  no  way  cured.  In  other  words,  if 
these  2Q  defendants  conspired  to  monopolize  trade,  and  adopted  the 
e.xpedient  of  putting  the  ownershij)  of  the  stock  of  the  constituent 
units  in  their  (twn  names,  they  would  still  have  l)cen  parties  to  a 
criminal  cimspiracy.     Acting  indi\  iduallw  but  not  in  concert,  each 


Efficacy  of  Dissolution 


503 


oiu'  of  them,  it  may  be,  might  have  acquired  whatever  shares  he 
pleased.  When,  however,  1>\  concerted  action,  they  set  about  to 
monopoHze  a  great  in(Ui>trv,  ihey  would  not  have  escaped  the  pen- 
alties of  the  law  it"  thi>-  had  put' the  title  to  the  shares  in  their  in- 
dividual names.  The  purpH)se  and  intent  of  u^ing  the  owner>hi[)  ac- 
quired through  this  joint  action  in  order  to  crush  competition  and  to 
establish  monopoly,  would  havi'  \-itiated  their  acts. 
The  Supreme  Court  of  the  United  .States  said  in  Swift  &  Co.  v. 

U.S.  (196  U.S.,  375):  ^       ,        ,  ,     f,     , 

'^Even  if  the  separate  elements  of  such  a  scheme  are  lawlul.  when 
they  are  bound  together  by  a  C(jmmon  intent  as  part>  of  an  unlawful 
.scheme  to  monopolize  interstate  commerce,  the  plan  may  make  the 
parts  unlawful." 

The  i)lan  now  propo-^ed  attempts,  therefore,  to  perpetuate  a  crm".- 
inal  conspiracy.  It  seeks  to  cure  a  great  evil  an<l  a  great  wrong  by 
substituting  a'nother.  The  29  individual  defendants,  convicted  ()t 
conspiracy,  are  making  reparation,  not  by  yielding  u[)  their  collective 
control,  but  by  taking  in  their  own  nanus  the  title  which  for  conven- 
ience they  had  \ested  in  the  com])any.  They  would  have  violati'd 
tlic  law  if,  with  concert  of  action,  they  had  taken  the  title  in  their 
own  names  when  the  combination  was  first  formed.  They  surely  do 
not  bring  themselves  within  the  law  by  doing  something  to-day 
which,  if  they  had  done  at  the  outset,  would  have  been  denounced  as 
a  crime. 

It  is  said,  however,  in  defense  of  the  plan,  that  the  control  will  be 
diluted  Itecau-e  voting  rights  are  now  to  be  given  to  the  j)referred- 
>tock  holder>.  We  haw  no  li-t  of  the  present  preferred-stock  holders. 
We  have  no  doubt  that  if  the  list  is  scrutinized,  and  if  the  individual 
defendants  are  compelled  to  submit  to  an  examination  under  oath 
with  reference  therett),  it  will  be  found  that  the  iireferred  stock  is 
held  in  large  part  by  the  conspirators  and  ])y  their  agents  and  rela- 
tives. We  urge  that  before  the  court  shall  accept  the  word  of  an  ad- 
judge, wrongdoer  that  it  has  reformed  itself  altogether,  there  be  a 
rigid  investigation,  under  the  sanction  of  an  oath,  of  these  professions 
of  reformed  innocence. 

No  plan  should  be  approved  unless  the  common-stock  holder-;  are 
prohibited  from  obtaining  or  retaining  control.  Control,  moreover, 
may  be  exercised  bv  something  less  than  a  majority.  The  cohesive 
j.ower  of  large  stockholders  reprer^enting  ,^0  or  40  per  ant  may  out- 
match the  scattered  forct-s  of  unorganized  individuals.  The  percent- 
ams  of  the  voting  stock  held  by  the  individual  defendant>  in  the 


ii 


■  ( 

.    4 

H 


5W 


lNUr>iRIAI.    CnMBINATiONS    AM)   TRUSTS 


14  i()r[)c (ration-  into  which  they  proix»se  to  divide  the  existing  com- 
hination  are  a;'  follows: 


Per  cent. 

American  Tobacco    Co. 3vit) 

Li<r<:;ett  &  Myers  Co. 40.76 

I'.  Lorillani  Co,         4o.7() 

.\merican  SnulT  Co. ^^■(>S 

Geo.  \V.  Helnie  Co. •?8.49 

Weyman  ^'t  Burton  Co. 2S.4g 

Conley  '"oil  Co.         33-^^ 

Johnston  Tii;  I'oil  Co. 3.5-73 

Mac.\ndre\vs  &  Forbes  Co. 3Q-77 

J.  S.  V(jung  Co.                4  ;;.S7 

K.J.  Reynolds  Tobacco  Co. 37-53 

L'niled  Cigar  Stores  Co. 37^5 

l{ritish-.\merican  Tobacco  Co. AA-^^ 

I'orto  Kic.iii  American  Tobacco  Co. 45-31 

It  i>ipiiartnt  I'rom  these  tlirure- thai  the  individual  defendant  >  will, 
in  the  ali-ence  of  united  action  iiy  the  majority  of  the  stockholdi  rs 
of  any  of  the  companies,  control  each  and  all  of  the  said  lompaiiies. 
Especially  will  this  be  so  wIk  n  it  is  borne  in  mind  that  the  individual 
difendants  will  start  out  in  actual  (ontrol  of  each  and  every  one  of 
such  coqiorations,  by  reason  of  the  f.n  t  th.it  tluy  will,  uiioii  the  or- 
ganization of  these  (ori Mirations,  undoubtedly  control  the  nomina- 
tion antl  election  of  ihe  direetors  and  otla  its  and  through  tlum  of 
each  and  evcrj*  employee  of  the  said  cor|)or.itions. 

Thus  to  restrain  the  individual  defend, mis  and  tho~e  who,  while 
not  joined  as  dt  fi  nd.mts  are  so  related  to  tlum  th.it  tlu}'  mu->t  have 
been  animated,  and  will  lie  animated,  by  a  common  purpose  is  not  ,in 
arbitrary  judicial  fiat  It  is  not  to  cast  aside  settled  legal  i)rinciiiK  ■ 
and  single  out  special  individuals  to  bear  some  s[v.'cial  burden:  tin 
underlying  principle  is  thi^:  These  men  have  combined  ;md  ( >  'iisjiired 
in  \iolation  of  law,  and  the  injunction  restraisiing  tlum  from  ac(juir 
ing  the  shares  merely  restrains  them  from  gi\ing  effect  to  and  per- 
|Htuating  the  same  combination  and  con>^piracy  under  another  form. 
They  might  h.ive  been  restrained  from  these  acts  when  tlu'  niciopoK 
was  first  planned.  \  long  career  of  ojii)ression  and  the  exercise  ol 
monopolistic  power  h;is  gi\'en  them  no  broader  license. 


Efficacy  of  Bissoi.uttox 


505 


\  II.  Till' prwpc-nl  plan  i- -i.miiticant  in  rc-[)Cft  of  ih;.- cc^KTrns  which 
arc  not  to  he  purt^  of  the  thrtr  .L'Rat  corjxjrations,  namely,  the 
American  Toljacco  Co.  (new.;,  Liggett  &  Myer<  Co.,  and  the  1\ 
Lorillard  Co. 

(a)  The  American  Tol)acco  Co.  i^  t.,  dixest  itself  of  its  intcrt'>t  in 
the  two  tin-foil  cimipanio,  hut  that  interest  (which  is  fto  pir  cent)  is 
to  be  distributed  to  its  common-stock  h(  Iders  as  a  dividend. 

ib)  The  American  Tobacco  Co.  is  to  divest  itself  of  its  interest  in 
ihe  R.  J.  Reynolds  Tobacco  Co.  (more  than  two-thirds  interest),  but 
that  interest  is  to  be  distributed  to  its  common-stock  holders  as  a 
'Hv  i(lc  nd  'I  his  company  is  a  ver>'  large  combination  in  itself,  con- 
tinuing >everal  branches  and  subcomjjanies,  and  lias  a  practical 
nionopcjly  of  the  Hit-phi^  lusiiiess  of  the  South. 

i'  I  It  will  also  divest  itself  of  its  interest  in  the  American  .SnulT 
C.  (about  4,^  per  cent),  Init  that  interest  is  to  he  distributed  to  its 
common-stocK  holders  as  a  dividend. 

((/)  It  will  also  divest  itsilf  of  its  interest  (about  75  [x  r  cent )  in  the 
Mai  .Andrews  &  Forbes  Co.,  but  thi-  inti  re- 1  is  to  be  di.^lributed  to  its 
•mmon-stock  holders  as  a  dividend. 

'-■)  It  will  also  divest  itself  of  its  interest  (about  tw(vthird-)  in  the 
brilish-.Xmerican  Tobacco  Co.,  but  that  interest  will  lie  di-lributed 
lo  its  common-stock  holders  as  a  dividend. 

(/)  It  will  al.io  divest  itself  of  its  interest  in  the  Cnited  CiRar 
Stores  Co.  (about  two-thirds),  but  that  interest  will  be  distributed  to 
its  common-'^tock  holders  ;is  a  dixidi'nd. 

It  will  therefore  result  that  each  of  these  si.\  constituent  parts  of 

the  present  combination  will  continue  to  be  controlled  by  the  same 

"■-mall  number  of  individuals  who  own  .•  majority  of  tl'ie  common 

'.ock"  of  the  ;\nurican  Tobacco  Co.     (See  opinion  of  the  I'nited 

.■^tates  Su[)reme  Court,  p.  175.) 

The  viciousness  of  such  an  arrangement  is  made  manliest  more 
sril.ingly  in  the  case  of  the  I'nited  Cigar  Stores  Co.  than  in  the 
ca>o  of  the  other  five  companies  thus  sought  to  be  separated.  The 
Initcd  C'gar  Stores  Co.  ha>  been  the  most  i>o'.veri'ul  agency  of 
the  combination  in  obtaining  the  control  of  the  tobacci)  indu.slry. 
Through  the  hundreds  of  stores  which  that  company  operates. 
and  by  virtue  of  the  speeial  trade  advantages  given  to  it  by  its 
'  ner.  the  .Annrican  Tobacco  Co.,  and  by  the  exercise  of  the 
iiiost  ruthless  and  cruel  [iraclices  in  driving  out  retail  ojiposition  and 
"bstructing  the  avenues  of  distribution  on  the  purl  of  independent 


IfM 

till 


i 


' 


;o6 


Industrial  Combinations  and  Trusts 


manufacturers,  this  company  has  proven  the  most  etTcctual  of  a!' 
ihe  barriers  to  the  entry  ot  others  into  the  tobacco  trade.  If  t^- 
mild  expedient  of  merely  scparatinj,'  this  company  from  the  c.r. 
hination  but  of  leaving  its  control  in  tht'  hands  of  the  same  miMi  who 
have  heretofore  controlkd  the  combination,  if  the  lose-waler 
remedy  of  gently  setting  aside  this  vast  agency  of  destruction  from 
its  former  control  by  the  combination  and  placing  it  in  tho  hands 
of  the  same  men  who  control  that  combination,  is  to  be  adopted, 
it  is  no  exaggeration  lo  say  that,  in  this  respect  at  least,  the  decree 
of  the  Supreme  Court  of  the  United  States  might  as  well  have  been 
a  blank  piece  of  paper. 

VIII.  It  i-  obvicus  tlKit  the  real  purpose  of  the  defendants  in  the 
prei).irati()n  of  thiir  |)laii  i>-  to  retain  to  themselves  the  "monop- 
oly" valuf  which  the  combination  has  acqui-ed. 

We  repeat  the  statement  quoted  above  from  the  opinion  of  the 
Sujireme  Court  (p.  1S2): 

"By  the  ever-present  manifestation  which  is  (exhibited  of  a 
conscious  wrongdoing  by  the  form  in  which  the  various  tr.msactions 
were  embodied  fmni  the  beginning,  ever  changing  but  ever  in 
substance  the  same.  Now  the  organization  of  a  new  company, 
now  the  control  exerted  by  the  taking  of  stock  in  one  or  another 
or  in  -everal.  so  as  to  obscure  the  result  actually  attained,  never- 
theless uniform  in  their  manife^tatinn>  df  the  puqxisc  to  restrain 
others  and  to  monopolize  .md  rit.iiii  powir  in  ihc  hands  of  the 
few  who,  it  WMui.l  seem,  from  the  In  ginning  (  'ntemplat((i  the 
mastery  of  the  trade  whidi  pr  ictically  follow  d.'' 

The  pl.m  now  propo-^id  conus  sfjuarely  w'thin  this  description. 
It  le,L\ts  unimpaired  the  opjxirtunity  for  t.ie  exercise  ot  .dl  the 
manifold  devices  to  whieli  tlie  managers  of  I  hi--  oimbination  have 
heretofore  re-orted  for  the  puri^i^e  of  retaining  "power  in  the  h.iiub 
of  the  few  v,ho,  it  would  -ei  ni,  Inmi  the  beginning,  contemplated 
tl.:  mastery  of  the  trade  which  practiciiiy  followed." 

We  abmit  that  there  is  e\iry  probaliility  that  if  these  individual 
defendants  be  allnwed  to  retain  control  of  tlu'  ( on-^tituent  companies 
(as  well  as  those  named  above  as  of  the  three  or  four  great  corpora- 
tions into  which  they  propose  to  divide  the  te<t  of  the  business  of 
the  comhinationl.  they  will  again  resort  u>  the  -.une  .|e\ices  and 
Jiractices  as  thiy  have  in  the  pa  4  for  the  |)uri)o>e  of  u>ing  sut  h  (on 
trol  to  retain  and  extend  their  mastery  and  dominion  over  the 
entire  tobacco  industry. 


Efficacy  of  Dissolutidn 


507 


!  ! 


The  enormous  value  which  has  btrn  acquired  hy  the  combina 
tion  throuj^li  its  monopolistic  |)raclices  and  the  yreat  inducement 
ilnrehy  held  out  to  these  defendants  in  their  ellurl  to  retain  the 
>anie  is  shown  in  Exhibit  C  {]).  41)  <>f  llit-i'"  proposed  i)lm.  This 
exhibit  >ho\vs  that  as  to  the  proposed  Lig^t^^tt  ^^  Myers  Co.  the  value 
of  the  tanirible  assets  is  stated  as  about  $30,000,000  and  the  value 
(if  the  "trade-marks  and  brands"  as  about  S-;t).ooo,ooo.  The 
corresponding  figures  a>  to  the  proj)osed  P.  Lorillard  Co.  are.  as 
to  the  tangible  assets,  about  S.-'-^. 000, 000  and  as  to  "trade-marks 
and  brands"  about  Sio.000,000.  Although  we  have  been  denied 
access  to  the  data  upon  which  the-e  figures  are  ba>ed,  we  lee! 
iu>tified  in  the  assumption  that  a  very  large  part  of  the  great 
\alue  a--igned  to  "trade-marks  and  brands"  is  represented  by 
•■;:.)o(l-\vill  value,"  which  must  in  turn  have  as  a  large  element 
]!'■■  "monopoly"  or  "merger"  value.  This  fact  is  further  shown  by 
■  i  -crutiny  of  the  said  exhibit,  from  which  it  will  ai)pear  that  a.->  to 
each  of  the  two  new  companies  the  earnings  over  and  above  the 
amounts  necessary  to  pay  interest  on  all  the  bonds  and  lhedi\  idmds 
on  the  preferred  stock,  and  which  will  be  available  as  dividends 
on  the  common  stock,  will  be  over  20  per  cent  of  the  amount  of  the 
1  oinmon  stock.  Tlie  inducement  plainly  exists  for  these  defend, mts 
to  retain  the  control  of  all  these  companies.  If  this  control  is 
1  \ercised  in  thi'  same  way  as  they  exercised  their  control  oi  the 
.  oml)ination  in  the  past,  it  can  only  result  in  a  retention  and  oxten- 
-ion  of  this  "monopolv  '  value. 


i"ii 


h 


l"\imui  S 

(I   \I\I   OK  Tin:    INDI  I'lNDl  N  is    IN    R1(.\KI)    Id    llli,   DIS  IRIUriKJN  ')F 
l(lll\(((i     \NI)    BRANDS     WIONI,     1111.     1  ()HA(  I  ()    I  ( (MP  ANIKS    AFirR 

IHssol  I    llnN   ' 

That  the  di\i-ioii  ol  tlic  .\mc»"ic.in  Tobadu  Co.  iirojierties  as 
lift  wet  II  ihf  .Vnierit.in  ToImcwi  Co.,  l.igirett  \-  .Myer-  I'ob.icco  Co., 
the  r.  l.orilhird  Co.,  and  K.  J.  Ueynold-  Tob.iKo  Co  .  i.  a  con- 
tinuation of  the  illegal  com!)in,ition,  is  discussed  in  I'.irt  II  ,d)ovc. 
That  the  j)ercentages  of  the  whole  business  of  the  country  in  the 
■  veral   l)ranches  of  the  tobacco  trade  ulloted   to  each  of   these 

'■  Ik.iriiiu^  In  Ion  ihi  (ummiltcc  on  InUTstatc  Commerce  on  the  Control  of 
CoriHiniiitins,  IVrsons  and  Individuate  i  iv^aRid  in  Interstate  Commcrre, 
Iniii'd  Stales  Senate,  ()jnd  Congress,  jnd  Sess..  mii-igii,  pp.  J^s-J^g.  Cf. 
I,.\hibils  J  and  4  alxive. 


'i  t 


■n 


^o8 


IXDl'STRIAl.    ('(n!  !;1NA1!<1N>    AND    TufSTS 


fctir  companic-s  is  such  as  to  preclude  the  possiliility  nf  fair  com- 
petition as  Itetweeii  them  and  the  exi^liu;,'  indepeiulents  is  -el  forth 
in  our  olijections  tiled  October  25  (pp.  4-10).  A  dc  ailed  examma- 
tion  of  the  trade  conditions  will  distlo-e.  in  addition,  that  the 
i)rands  and  l)Usiness  are  so  distributed  ur.de.  the  plan  as  to  prevent, 
in  large  measure,  competition  among  the  four  companies. 

'Hie  facts  necessary  to  bring  this  matter  fully  before  the  court 
do  not  ajiiicar  in  the  present  record.  They  can  not  be  adequately 
j)resented  without  the  examination  of  wilr.esses  familiar  with 
trade  condition-,  and  also  without  an  opportunity  of  submitting 
to  the  court  certain  data  in  regard  to  the  defendants'  business 
included  among  the  papers  to  which  the>e  remon>trants  sought 
access  bv  t'vir  petition  filed  October  iS,  loi  i ;  and  access  to  which 
was  denied  by  the  court.  liut  the  following  f  u  t>  not  disclosed  by 
the  defendants  in  their  petition  tiled  Octobi  r  10.  U)ii.  will,  we 
lielieve,  suffice  to  sIkav  the  court  tluit  the  ,  po-ed  division  o! 
the  trust's  proi)erties  would  leave  each  of  the  four  companies  so 
dominant  in  important  dep.irtm(iu>  and  markets  that,  through 
them,  the  existing  monopoly  would  be  practically  continued. 

First. —  ihr  Imi -tobacco  trade 

Defendant-'  jtl.iii.  Kxhibit  I''.,  sets  out  the  average  production 
of  live  leading  types  of  tobacco,  together  with  the  estimated  jiur- 
chasesof  each  tvpe  by  the  .American  Tobacco  Co.,  Liggett  &  Myers 
Co.,  P.  Lorillard  Co.,  R.J.  Reynolds  Tobacco  Co..  and  the  Ikili-h- 
.•\merican  Tobacco  Co.  From  the  face  of  tho-e  ligures  it  would 
api)ear  as  if  the  plan  had  provided  for  reasonable  competition  as 
between  these  companies  for  tlie  various  types  of  tobacco.  Fact- 
not  di>closed  by  the  plan  will  show  a  very  dilYerent  result. 

I.  Hurley  tobacco. — DelVndanls"  plan,  Fxhibit  E,  sets  forth  that 
of  the  total  average  crop  of  burley  (200,000,000  pounds)  the  .Ameri- 
can Tobacco  Co.  would  purchase  4i,()()o.o5S;  Liggett    &    Myer- 
Tobacco  Co.,  bq,l6,^()40;  I'.  Lorilhird  Co.,  24,074.()4i;  ;ind  R.  j 
Reynolds  Tobacco  Co.,  5,000,000  pounds,  as  if  these  fourcomp.mii 
would  be  competitors  for  this  aggregate  of  i,:^o,ooo,ooo  |)ound 
.Asa  matter  of  fact,  the  burley  tyi)e  of  tobacco  comprises  40  (lifferent 
grades,  of  which  the  most  important  are  the  following:  Medium  red 
burley  leaf,  of  which  the  average  crop  is  about  00,000,000  pounds, 
common  red  burley,  leaf  and  tips,  of  which  the  average  crop  is  about 
40.000,000  pounds;  trashes  (of  various  finalities),  of  which  the  pro 
duction  is  about  50,000,000  i)ounds;  line  bright  leaf  and  nne  white 


Efficacy  of  Dissoiation 


509 


'  i 


l)urlcy,  of  which  the  production  i,>  from  10,000,000  to  15.000,000 
pnunds.  These  variou-  snuie>  vary  in  (juahty  and  (juantity  in  al- 
most every  crop,  according  to  the  season.  The  values  of  the  said 
classes  in  a  simple  year  are  widi'ly  difft-rent.  The  average  price  per 
pound  of  the  medium  red  buriey  would  be,  perhaps,  i:  to  15  cents; 
(if  common  red,  7  to  10  cents;  nf  trashes,  7  to  12,'  _;  cents;  of  bright 
leaf  and  tine  white  buriey,  lO  to  20  cents. 

The  distribution  of  the  brands  of  plug  and  of  -niokiiig  tol)acco 
under  the  defendants'  })lan  is  such  that  the  .American  Tobacco  Co., 
the  Liggef  &:  Myers  Tobacco  Co..  the  I*,  l.orillard  C".,  and  the 
i\.  J.  Riynolds  'rolxicco  Co.  would  not,  to  any  large  extent,  be 
competitors  for  burK-y  tobacco.  l)ut  we  ild  e.ich  be  practically  a 
dominating  ])Ulcha^■er  of  different  grades  of  buriey;  for  instance: 

(a)  -Medium  red  le;if  buriey:  The  Liggett  &  Myers  Tobacco  Co. 
would  control  the  medium  red  leaf  buriey  market  as  maker  of  the 
"Star"  and  "Horsehoe"  brands  of  chewing  tobacco,  by  far  the 
leading  chewing  tobacco  hrand>  in  the  country,  for  iliey  would 
lie  the  [)rincip;d  purchasers  of  medium  red  leaf  hurley.  Xdther 
the  .\merican  Tobacco  Co.  nor  the  V.  Lorillard  Co.  nor  the  K.  J. 
Reynolds  Tobacco  Co.  re(iuire-  any  api)reciable  <iuanlily  of  this 
grade  of  buriey. 

(/))  Common  retl  buriey:  The  .Xmerican  Tob.irco  Co.  would 
control  the  (ommon  red  buriey  marki't  as  maker  of  the  following 
hrind-  «f  i)lug  chewing  tobacco:  '-.Xreerican  Xavy."  "Seiuiire 
Deal,"  "Standard  Xavy,"  "Corker."  and  "  i\.-.n  Talk."  Neither 
the  I.iu'gitt  ^-  .Mver-  Tol)acco  Co.  nor  the  V.  Lorillard  Co.  or  '  the 
R.  J.  Re\  Holds  Tob.Kxc)  Co.  requiri's  any  api)rec'able  i|uanlity  of 
thiscommon  red  buriey  lor  the  brands  a.-signed  t((them  in  the  pl.m. 
Therefore  the  .Xmeriean  I'obacco  Co.  would  control  ih.e  common 
led  liurlev  market. 

(f)  Hurley  trashes:  The  I'.  Lorillard  Co.  would  dominate  the 
market  for  buriey  lra>lus  as  the  maker  of  the  "Union  Leader," 
"Sensation,"  and  "Just  Suits"  brands  of  smoking  tobacco.  Neither 
ihe  .American  Tobacco  Co.,  Liggett  &  -Myers  Tobacco  Co.,  or' 
the  R.  J.  Reynolds  I'obacco  Co.  refiuires  any  ap[)reciabie  quantity 
of  that  grade  of  buriey. 

((/)  Line  white  buriey:  The  .\merican  Tobiuro  Co.,  a-  maker  of 
the  "Lucky  Strike,"  "Tuxedo,"  and  "Old  Lnglish"  braniK  of 
smoking  tobacco,  would  retjuire  the  greater  jiart  of  the  tine  white 
hurlev.      Liggett   iS:    Mvers  'I'obacco  Co.    would    re(iuire  a   >inall 

'  Ihus  in  original. — lA. 


iio 


l.NUCSTRLVL    COMBINATION'S   AN*D   TRUSTS 


(luanlily  of  llii?  cr^de  for  ihci:  "  VcIvL't,"  lirand  of  smoking  tobacco, 
and  the  R.  J.  Reynolds  Tobacco  Co.  a  small  cjuantily  for  their 
'T'rince  Alljen"  brand  of  smoking  tobacco. 

2.  Viri^iiiid  d)id  .Xort/i  Carolina  briiihl  Inharco. — Defendant's  plan, 
Exhibit  E,  states  the  total  a\erage  crop  of  \'irginia  and  North 
Carolina  bright  tobacco  to  be  240,000,000  pounds,  of  which  the 
.\merican  Tobacco  Co.  would  require  5i,2()vS7o;  the  Liggett  & 
Myers  Tol)acco  Co.,  27,755,411;  the  P.  Lorillard  Co.,  2,556,007; 
the  R.  J.  Reynolds  Tobacco  Co.,  25.000,000;  and  the  British- 
American  Tobacco  Co.,  40,000,000  pounds. 

On  the  face  of  the  exhibit  it  would  appear  that  four  important 
competitors  for  thi>  type  of  tobacco  were  ])rovide<l  l)y  the  trust's 
plan.  'I"he  plan  fails,  however,  to  disclose  that  tliere  are  numerous 
grades  of  the  tyjjc  of  tobacco  known  as  Virginia  and  N'orth  Carolina 
bright,  of  which,  perha[>s,  12  important  grades  are  recjuired  for 
(htferent  classes  of  tobacco  products.  Consefiuently  thiTe  might 
be  a  number  of  large  and  active  buyers  for  \'irginia  and  Xorth 
Carolina  tobacco  in  the  same  market  and  yet  no  one  compete 
with  any  of  the  others. 

(a)  High-grade  >moker:  Thus,  under  the  plan,  the  American 
Tobacco  Co.,  for  its  brand  of  'TUill  Durliam."  the  largest  sellinii 


the  country,   would   reciuire  great 


brand  of 

quantities  of  the  gr.ide  known  as  high-grade  smoker.  Xeithcr  the 
Liggett  &  Myi!<  Tobacco  Co.  nor  the  V.  Lorilkird  Co.  nor  the 
Briti>h-.\merican  Co.  appears  to  have  allotted  to  it  any  brand  of 
smoking  tobacco  which  requires  this  grade  ^tf  Virginia  and  N'orth 
Carolina  tol)acco;  and  the  requirements  of  the  R.  J.  RevnohU 
Tobacco  Co.  for  thi<  graile  wmild  be  in^-ign  ucaiit. 

(b)  Low-grade  -moker:  The  Liggett  iV  Myer--  Tobacio  Co.  re- 
quires for  its  brand  of  "  Duke's  Mixture,"  the  grade  known  as  \'ir- 
ginia  and  North  Carolina  low-grade  smoker.  Neither  the  .\merican 
Tobacco  Co.  nor  V.  Lorillard  Co.  appears  to  have  had  allotted  to  it 
any  brand  of  smoking  tobacco  whidi  require--  thi-  low  grade 
smoker,  and  the  amount,  if  any,  rec|uired  by  the  R.  J.  Reynold- 
Tobacco  Co.  or  the  Briti'-h-.Xmerican  Co.  would  bi'  in^ignihcant. 

(ft  Leaf:  The  R.  J.  Reynolds  Tol)acco  Co.,  for  their  brand>  im 
"Schnapps"  and  'T^rown's  Mule"  and  minor  brands,  purchase 
the  LTtater  part  ui  the  grule  known  as  leaf  V'rginia  and  North 
Carolina.  .Neither  the  American  Tob.icco  Co.  nor  the  LigL'ett  \- 
Myers  Tobacco  Co.  .eciuire-  any  of  this  grade. 

(</)   Export   leaf:    The  British-Anuricm    Toljacco  Co.  jjurcha-i  . 


Efficacy  of  Dissolution 


511 


for  its  export  business  entirely  different  f^rudes  of  V'ir<jinia  and  Xorth 
Carolina  from  those  referred  to  alxne,  the  grades  i)urcha>ed  by  them 
hein^  known  as  export  leaf  \'irginia  and  North  CaniUna.  Neither 
the  American  Toljacco  Co.,  the  Li^^ett  &  Myers  Tobacco  Co.,  the 
I'.  Lorillard  Co.,  nor  the  R.  J.  Reynolds  Tobacco  Co.  recjuires 
jny  aiipreciable  (]uanlity  of  the  distinct  export  <,'rade>  of  tobacco. 

.^.  Dark  z-'cstcni  tobacco. — Defendants'  plan.  Exhibit  E,  shows  that 
the  average  crop  of  dark,  western  tobacco  is  200,000,000  pounds, 
of  which,  however,  a  large  part  is  exi)orted.  Of  the  American  con- 
sumption, the  American  Tobacco  Co.  takes  19,4:;,:^, 365;  Liggett  & 
Myers  Tobacco  Co.,  only  :;,iq6,S06;  P.  Lorillard  Co..  only  1,446,- 
2iy,  and  the  R.  J.  Reynolds  Tobacco  Co.  none.  It  will  be  seen, 
therefore,  that  the  greater  part  of  all  the  jjurchases  of  dark  western 
i>  made  by  the  .American  To])acco  Co.  and  is  used  by  it  for  its 
-moking  brands  uf  "  Fi\ r  Brothers"  and  "Peerless,"  the  two 
largest  selling  brands  ni  ioiig-cut  in  .\merica. 

4.  Seed  /,('(;/.  -Defendants'  plan.  Exhibit  E,  shows  that  of  the 
seed-leaf  tobacco,  which  is  u>ed  mainly  for  cigars  and  so-called 
scrap  smoking  and  chewing  tobacco,  the  average  i)roduction  of  the 
country  is  iSo,ooo,ooo  pound-.  Of  this  the  quantity  purchased 
by  the  American  Tobacco  Co.  is  estimated  at  o.iu.ooc);  by  the 
Liggett  &  Myers  Tobacco  Co.,  5.076,iSo;  by  the  P.  Lorillard  Co., 
U),(;(),5.720;  and  by  the  R.  J.  Reynolds  Tobacco  Co.  none.  The 
trust's  use  of  thi-  tobacco,  a-ide  from  cigars  and  cheroots,  is  mainly 
for  its  scrajj-tobacco  bu-iiie-s  and  little  cigars,  of  which  the  largest 
-riling  brands  are  "'  Hom-l"  and  "  Polar  Bear."  Both  of  the  brands 
are  assigned  to  the  P.  Lorillard  Co..  thus  making  that  company 
.imong  the  con-titucnl  elcm(nt>  of  the  tru-t,  by  far  the  leading 
purchaser  of  seed  leaf.  The  trust's  purchases  of  low-grade  seed 
leaf  -  that  is,  the  tiller  types,  hail-cut  typis,  and  other  types  of  leaf 
damaged  in  growing —are  so  great  in  Wisconsin,  Connecticut, 
and  New  \'ork  that  it  practically  dominates  the  American  markets 
for  low  grades  of  seed-leaf  tobacct),  with  the  exception  perhap-  of 
IVnnsylvania  and  Ohio — and  in  some  years  the  markets  of  these 
States  also. 

Second. — The  cii^arctte  trade. 

Defendants'  plan.  Exhibit  D,  indicates  on  its  face  such  a  dis- 
tribution of  the  cigarette  business  of  the  trust  as  to  create  n  ison- 
able  comjjetition  between  the  American  Tobacco  Co.,  Liggett  & 
.\lver-  Tobacco  Co.,  and  1'.  Lorillard  Co.    The  .\merican  Tobacco 


I 


INDISIKIAI.    Co.MBINArioNS    AND     iRrSTS 


Co.  is  Riven  four  Ijrands,  I.i;i.mll  &  .Mycr-  six  hrr.nd^,  and  ttu- 
Loriilard  Co.  five  brands.  As  a  n^UUr  oi  facl,  ihv  creation  uf 
compelilion  in  cigarettes  amonj;  the>e  three  companies  is  apparent 
only;  because  tiic  brands  are  so  distributed  as  to  give  each  of  the 
three  companies  substaiitially  a  dominating  position  in  a  specific 
branch  of  the  cigarette  trade  or  of  a  sju'cific  cigarette  market. 

The  cigarette  trade  falls  substantially  into  six  classes:  Turkish 
liigh-grade  cigarettes,  Turkish  Icnver-grade  cigarettes,  domestic  or 
Virginia  cigarettes,  Turkish  and  domestic  mi.xed,  lowest  grade  of 
mixed  Turkish  and  domestic,  and  domestic  cigarettes  with  Turkish 
mouthpieces. 

1.  Turkish  li'r^li  grade. — Under  the  pl;in,  the  dominating  position 
in  the  Turkish  high  grade  is  gixm  to  the  American  Tobacco  Co. 
through  the  "Pall  Mall"  brand.  Xo  brand  of  high-grade  Turkish 
cigarette  is  allotted  to  the  Liggett  &  Myers  Tobacco  Co.  The 
brand  given  the  P.  Loriilard  Co.,  "f^gyptian  Deities,"  has  become 
relatively  unimportant  as  compared  with  "Pali  Mall." 

J.  Turkish  Unvcr  grade. — The  dominant  position  in  the  lower- 
grade  Turkish  cigarettes  is  given  to  the  P.  Loriilard  Co.  by  allotting 
to  it  the  "Helmar,"  "Murad,"  "Mogul,"  and  "Turkish  Trophies." 
Neither  the  American  r.  ir  the  Liggett  &  Myers  Tobacco  Co.  is 
allotted  any  strictly  competing  brand. 

V  Domestic  or  Virginia. — Tiie  Liggett  t*^  Myirs  Tobacco  Co. 
is  given  the  dominant  i)osition  through  the  "Piedmont."  "Home 
Run,"  "  King  IJee,"  and  ".American  Heauty"  brands.  The  P.  Lorii- 
lard Co.  is  not  allotted  any  competing  brand.  The  .\merican  To- 
i)acco  Co.  receives  the  "Sweet  Caporal":  but  the  sale>  of  that  brand 
have  become  insignilicunt. 

4.  Turkish  and  domeslic  mixed. —  The  Liggett  i^:  Myi  r^ 'Idliacco 
Co.  is  allotted  the  "Fatima"  brand,  which  i.-^  believed  to  be  the 
most  important  brand  of  cigarette  u])on  the  market.  N'eitht  r  the 
.\merican  Tobacco  Co.  nor  the  P.  Lorill. nd  Co.  is  allottid  any 
brand  which  comiietes  wit!-  this. 

5.  Loicest  grade  Turkish  or  perhaps  Turkish  and  Virgi}!!a  mixed. — 
The  .\merican  Tobacco  Co.  is  allotted  both  the  "Hassan"  and  the 
"Mecca"  brands.  Neither  the  Liggett  &  Myers  Tobacco  Co.  nor 
the  P.  Loriilard  Co.  is  allotted  any  competing  brands. 

h.  Domeslic  with  Turkish  mouthpiece. — 'The  Liggett  &:  M\er> 
Tobacco  Co.  is  allotted  the  "lmi)eriales,"  which  has  a  monoyioly 
not  merely  in  this  kind  of  cigarette  but  also  substantially  of  the 
market  fmainlv  the  Pacific  coast)  where  it  is  sold. 


Efficacy  of  Dissolution 


513 


Xot  only  is  each  of  the  three  companies  thus  given  a  dominating 
|Hi-ition  in  the  respective  classes  of  the  cigarette  trade,  liut  the 
domination  through  those  classes  extends  to  a  certain  extent  also 
fii  particular  territories.  For  instance,  the  P.  Lorillard  Co.  has 
been  allotted  the  brands  which  sell  most  largely  in  the  East,  and 
ihi.-  Liggett  &  Myers  Tobacco  Co.  the  brands  which  sell  ber>t  in  the 
.Middle  West  and  South. 

Third. — The  smoking-tohacco  trade. 

Defendants'  plan,  Exhibit  D,  presents  the  apparent  creation  of 
(.  ompetition  in  smoking  tobacco  b\-  giving  to  the  American  Tobacco 
Co.  six  brands,  to  the  Liggett  &  Alyers  Tobacco  Co.  seven  brands, 
and  to  the  P.  Lorillard  Co.  five  brands.  In  fact,  no  substantial 
competition  Ijetween  these  three  companies  is  provided  for. 

The  smoking  tobacco  of  the  country  is  divided  into  seven  dilTerent 
classes,  namely,  high-grade  granulated,  low-grade  granulated,  high- 
grade  burley  granulated  put  up  in  lo-cent  tin  toxes,  sliced  plugs, 
long  cuts,  cut  plugs,  and  scrap. 

1.  High-grade  granulated. — The  American  Tobacco  Co.  is  allotted 
"Bull  Durham,"  the  leading  brand  of  smoking  tobacco  in  the 
country'.  No  brand  of  high-grade  Virginia  granulated  smoking  to- 
bacco is  allotted  either  to  the  Liggett  &  Myers  Tobacco  Co.,  the 
P.  Lorillard  Co.,  or  the  R.  J.  Reynolds  Tt)bacco  Co. 

2.  Low-grade  granulated. — The  Liggett  &  Myers  Tobacco  Co.  is 
allotted  "Duke's  Mixture,"  the  leading  brand  of  low-grade  granu- 
lited  tobacco  in  the  country,  as  well  as  "king  Bee."  No  competing 
brand  of  low-grade  Virginia  granulated  smoking  tobacco  is  allotted 
( ither  to  the  American  Ti)liacco  Co.  or  to  the  P.  Lorillard  Co. 

^.  High-grade  burley  granulated. — In  this  department  there  is  ;! 
reasonable  distribution  of  brands  between  the  three  companies,  the 
.American  Tobacco  Co.  having  "Tuxedo,"  the  Liggett  &  Myers 
Tobacco  Co.  "Velvet,"  and  the  R.  J.  Reynolds  Tobacco  Co.  the 
"Prince  Albert"  brands. 

4.  .S7/o(/  plugs. — The  leading  brands  are  "Lucky  Strike"  and 
"Old  English,  '  both  assigned  to  the  .Xmerican  Tobacco  Co.  Neither 
the  Liggett  &  Myers  Tobacco  Co.,  the  P.  Lnrillard  Co., nor  the  R.J. 
Reynolds  Tobacco  Co.  is  allotted  any  sliced  plug  brand. 

5.  Long  cuts. — The  leading  brands  are  "Five  Brothers"  and 
"Peerless,"  l)oth  allotted  to  the  .■*  merican  Tobacco  Co.  These  are 
the  best  selling  brands  in  the  country  manufactured  from  dark 
tobacco.    Neither  the  Leggett  &  Myers  'lobacco  Co.,  the  P.  Lorillard 


SH 


Inuisirial  Combinations    ,   o  Trusts 


Co.,  nor  tlu'  R.  J.  Reynolds  Tobacco  Co.  is  allotted  any  Ijrand  com- 
peting with  llusc.  On  the  other  hand,  LiKK»-tl  &:  Myers  Tobacco 
Co.  is  allotted  "  Sweet  Tij)  To]),"'  a  kind  of  lon^-cut  made  from  burley 
tobacco,  and  neither  the  American  Tobacco  Co.  nor  the  P.  Lorillard 
Tobacco  Co.,  nor  the  R.  J.  Reynolds  Tobacco  Co.  is  allotted  ny 
tirand  which  cnipetes  with  it. 

().  Cut  pliii:,s.  -The  three  k'adinji  brand:-  of  cut  |>lu,t,'s  are  allotted 
to  the  P.  Lorillard  Co.,  namely,"  Cnion  Leader,"  "Sen-atioii,"  and 
"Just  Suits."  Neither  the  American  Tobacco  Co.  nor  the  Lig^'ett  & 
]Myers  Tobacco  Co.  is  allotted  any  brand  whch  comi)etes  with  these. 
The  R.  J.  Reynolds  Tobacco  Co.'has  a  m\\  brai^.d,  "C.eo.  Washing- 
ton," not  vet'well  otablished,  which  may  be  deemed  a  competitor. 

7.  .Strap.  The  two  princi[)al  brands  are  a--i,t,me(l  to  the  P.  Loril- 
lard Co.,  namely,  "Honest  "  and  " Polar  Pear.'"  Neither  the  .\merican 
Tobacco  Co.,  the  Liggett  &  Myers  Tobacco  Co.,  nor  the  R.  J.  Reyn- 
olds Tobacco  Co.  appears  to  have  any  brand  of  scrap  tobacco. 


Fourth. — The  plug  tobacco  trade. 

Defendants'  plan,  K\hil)it  D,  presents  an  apparent  competition 
in  plug  tobacco  bv  giving  to  the  American  Tobacco  Co.  nine  brands, 
Liggett  &  Mvers'  three  brands,  and  P.  Lorillard  two  brands.  As. 
a  matter  of  fact,  there  are  several  distinct  classes  of  plug  tobacco. 
Plug  ma>-  be  (li\ide(l  broailly  into  >weet  navy  plugs  and  flat  l)lugs. 
The  ^we'et  navy  should  l)e  di\i(led  again  into  three  grades— high, 
medium,  and  low.  The  flat  plugs  are  divided  into  two  classes, 
sun-cured  and  tlue-curtd. 

1.  Xavy  ///.i;//.— The  leading  na\y  high-grade,  "Piper  Heid.Meck," 
is  allotted  to  the  American  Tobacco  Co.  Neither  the  Liggett  & 
Myers  Tol)acco  Co.,  the  P.  Lorillard  Co.,  nor  the  R.  J.  Reynolds 
Tobacco  Co.  is  given  any  comjjeting  brand.  There  i>  another  high- 
grade  chewing  tobacco — Drummond's  Natural  Leaf— allotted  to 
the  Liggett  &  Myers  Tobacco  Co.,  but  it  is  not  of  the  same  class  as 
the  Piper  Ileid deck. 

2.  Xaiy  medium. — Tl-  •  leading  brands  of  medium  navy  plug  are 
"Star"  and  "Horseshoe.  Hoth  of  these  are  allotted  to  the  Liggett 
&  Myers  Tobacco  Co.  These  are  the  controlling  brands  in  Amer- 
ica. '  The  .\mi  rican  Tobacco  Co.  is  allotted  "  Spearhead,""  a  compet- 
ing brand,  but  its  sales  are  relatively  unimportant.  The  P.  Lorillard 
Co.  is  allotted,  likewise,  a  competing  brand,  "Clima.x,""  but  the  sales 
of  it  are  also  relati\eiy  unimjiortant.    The  sales  for  1907  of  "Star" 


KfKK.ACV    Ol      DlSSOl.LTION 


5IS 


were  :y.r-,2  2,\~^  pounds,  of  "Ilorsishnc"  ir,,2iT.575,  whereas  those 
"f  "Spcarhe;i<i"  were  6,850,025,  and  o'  •'Climax'"  2,()57,,^c(). 

The  r.  L(.rillard  Co.  also  is  allmttd  the  "Planet"  brand,  hut 
that  is  of  a  r-omewhat  dilTerent  rharactcr.  It  stands  in  a  class  by 
iiselt  and  controls  the  New  haif^dand  market. 

V  .Wivy  lei.'  i^radc-  The  leading  brand  of  lov-prade  nav}-  is 
'■American  Na\y."  'riii>  as  well  as  "Scjuare  Deal,"  "Corker," 
and  "Town  Talk,"  all  n;i\ y  low  grade,  are  alloted  to  the  American 
Co.  Neithtr  the  Liggett  &'M\ers  Tobacco  Co.,  the  V.  I.orillard  Co., 
nor  the  K.  J.  Reynold-  Tobacco  Co.  is  allotted  any  brand  ol  this 
class. 

4.  Sim-currd  /)/»,?.— The  R.  J.  Reynolds  Tobacco  Co.  controls 
many  bran(l>of  tlu-  sun-cured  plug,  the  principal  of  which  is  "R.  J.  R. 
.Sun-cured."  I^xhibit  D  does  not  disclose  that  either  the  American 
Tobacco  Co.,  the  Liggett  &  Myers  Tobacco  Co.,  or  the  P.  Lorillard 
Tobacco  Co.  will  have  any  competing  brand. 

5.  b'hic-cund  /;//(,<,'.-  The  R.  J.  Reynolds  Totiacco  Co.,  through  its 
several  brands,  vi  which  the  two  leading  ones  are  "Schnapps"  and 
"Brown's  Mule."  controls  the  tlue-cured  llat  plug.  Neither  the 
.\merican  Tobacco  Co.  nor  P.  Lorillard  Co.  would  have,  s^o  far  as 
the  plan  disclo-es,  any  competing  brand. 

The  domination  by  particular  companies  of  particular  depart- 
ments of  the  [)lug-tobacco  trade  is  not,  howc\er,  confmed  merely 
to  the  domination  of  classes  of  jilug,  as  indicated  above.  It  extends 
to  a  certain  extent  also  to  the  domination  of  markets.  Thus  the 
Liggett  &  Mvers  Tobacco  Co.,  with  "Star"  and  "Horseshoe,"  will 
dominate  the  Middle  West;  R.  J.  Reynolds  Tobacco  Co.,  with 
'Brown's  Mule"  and  "Schnapi)s,"  will  dominate  the  South;  and 
the  P.  Lorillard  Co.,  with  "Planet,"  will  dominate  the  chewing-plug 
business  ol  N'-'w  England. 

FiFiii. — Little  cigars  trade. 

Defendants'  plan,  Kxhibit  D.  purports  to  show  competition  in 
little  cigars,  awarding  to  the  .-Vmerican  Tobacc  Co.,  Liggett  &  Myers 
Tobacco  Co.,  and  the  P.  Lorillard  Co.  each  om  brand.  As  a  matter 
(if  fact,  there  are  two  or  three  distinct  kinds  of  little  cigar — the 
high  grade,  selling  10  for  10  cents;  the  low  grade,  selling  10  for  5 
cents:  some  with  Burlev  and  some  with  seed  wrapt)er. 

The  Lorillard  Co.,  with  "Between  the  Act>."  will  dominate  the 
hiszh-grade  little-cigar  business;  the  Liggett  &  Myers  Tobacco  Co. 
with  "Recruit."  will  dominate  the  low-grade  little-cigar  bu^ncss; 


III 


i 


Si6 


Industrul  Combinations  and  Trusts 


and  the  American  Tobacco  Co.  will  have  "Sweet  Caporal,"  a  little- 
cigar  brand  of  a  distinct  t>'pe. 

ExinuiT  9 

RESPONDENTS  AMENDED  RETIRN  TO  TIFE  ALTERNATIVE  WRIT  OF 

MANDAMUS ' 

ResfKindents  for  a  further  return  to  the  said  alternative  writ  of 
mandamus,  say  that  neither  of  relators  has  any  direct  i)ersonal 
interest  in  said  Waters-Pierce  Oil  Company,  and  neither  of  them  in 
his  own  ri<;ht,  or  in  his  own  interest,  or  in  the  pursuit  of  his  own 
business,  owns  any  of  the  stock  of  the  Waters-Pirrce  Oil  Company; 
but  respondents  say  that  said  relators  are  acting  herein  solely  as 
the  representatives  of  John  D.  Rockefeller,  William  Rockefeller, 
Henry  M.  PlaRler,  John  D.  Archbold,  Oliver  11.  Payne,  Charles  M. 
Pratt,  and  divers  other  persons  whose  names  are  to  resjiondents 
unknown,  who  are  the  same  parties  who  have  heretofore  owned  and 
controlled  the  Standard  Oil  Company  of  New  Jersey,  which  has 
been  heretofore  dissolved  by  ihe  courts  of  the  United  States  as  an 
unlawful  combination  in  restraint  nf  trade,  as  will  be  hereinafter 
more  particularly  set  forth,  and  that  said  individuals  so  represented 
by  relators  have  combined  and  confederated  to  continue  said  un- 
lawful combination  and  conspiracy  thus  dissolved.  Respondent- 
further  say  that  said  unlawful  combination  and  conspiracy  now 
exisli;  ;  consists  in  the  control  of  the  majority  of  stock  in  sul)sidiar\- 
corporations  located  in  diiTereut  States,  and  that  such  stock  control 
is  the  essential  and  effective  means  of  furthering  the  puq)oses  of  said 
unlawful  com.bination,  the  purpose  and  eflect  of  which  is  to  create 
a  monopoly  in  the  production  and  sale  of  petroleum  and  its  products 
throughout  the  United  States. 

'  State  of  Missouri  ex  rel.  Stewart  v.  J .  D.  Johnson.  Pleadings,  Rulings  by 
the  Court  etr.,  In  the  Circuit  Court  of  the  City  of  St.  Loiii^,  .\pril  Term,  191:, 
pp.  40  ll.  This  controversy  arose  by  rcajon  of  the  refusil  of  the  Inspectors  of 
Election  of  the  Walers-I'icrce  Oil  Company,  that  had  been  designated  by  Mr. 
Pierce  as  President,  to  count  the  majority  votes  of  the  Ccmixuiy  that  had  been 
cast  at  the  instance  of  llie  Standard  Oil  interests.  Tliis  refusal  was  based  on  tiie 
ground  that  liie  shares  were  licinj;  illegally  \otcd  in  furtherance  of  a  conspiracy 
to  \iolate  and  e\ade  the  decree  of  the  Federal  Court. 

.Mthough  .Mr.  Pierce  owns  only  anproximately  one-third  of  the  shares  he  has 
been  in  control  of  the  Waters- Pierce  Company  and  under  the  Missouri  Law  the 
President  names  the  Inspectors  of  I'.lection.  Uf)on  the  refusal  to  cnmit  these 
votes  the  pro.xies  named  by  the  Standard  Oil  brouj^ht  a  prot  eeding  in  mandamu- 
in  the  Slate  of  Missouri  against  tlie  Inspectors  of  Klection. — Kd. 


Efficacy  of  Dissolutkjn 


517 


Respondents  further  say  that  the  relators  herein  are  actinj;  solely 
as  the  rejjresentativcs  of  said  unlawful  combination  and  conspiracy  in 
attempting  to  secure  the  control  of  the  Waters-Pierce  Oil  Company, 
and  that  the  means  by  which  the  objects  of  said  conspiracy  are 
sought  to  be  carried  out  are  the  election  of  a  majority  of  the  direc- 
torate of  the  Waters-Tierce  Oil  Company  aiui  other  subsidiary 
corporations  m  dilTerent  States,  which  should  thus  be  composed 
cither  ol  the  parties  to  said  conspiracy  or  the  nominees  of  those  en- 
i^aged  therein;  and  by  this  means  the  complete  domination  of  the 
industry  will  be  efl'ccted  and  a  monopoly  secured  therein. 

Respondents  say  that  the  relators  herein  are  parties  to  said  con- 
spiracy, and  are  under  its  control,  and  are  its  nominees  for  the  said 
puq)ose,  and  that  the  attempt  to  elect  thenr.  to  the  directorate  of 
the  Waters-Pierce  Oil  Com[)any  is  for  the  pu.pose  of  securing  the 
(ontrol  of  said  company  in  the  furtherance  of  said  unlawful  con- 
spiracy and  as  one  of  the  overt  acts  in  efTectuating  this  common 
design  in  the  establishment  of  said  monopoly.  Respondents  s;'y 
that  this  proceeding  in  mandamus  is  a  furtherance  of  said  unlawful 
puqrose. 

Respondents  further  say  that  the  unlawful  combination  and  con- 
spiracy, violative  of  the  laws  of  the  Unitt  i  States,  and  of  the  State 
of  Missouri,  which  is  thus  sought  to  be  dfected  by  these  relators, 
in  securing  the  control  of  the  Waters-Pierce  Oil  Co  npany,  is  a  con- 
tinuance and  renewal  of  the  same  unlawful  combination  and  con- 
spiracy in  restraint  of  trade  which  has  been  adjudged  and  condemned 
I'V  the  Supreme  Court  of  Missouri,  affirmed  by  the  Supreme  Court 
<if  the  United  States  and  by  the  Circuit  Court  of  the  United  States, 
the  Eighth  Judicial  Circuit,  affirmed  by  the  Supre-ne  Court  of  the 
I'nited  States,  as  hereinafter  specifically  set  forth. 

Wherefore,  respondents  say  that  relators  are  merely  acting  in 
behalf  of  saifl  unlawful  combination  and  conspiracy,  and  for  further- 
ing the  purposes  thereof,  and  that  the  jurisdiction  and  process  of 
this  court  should  not  be  used  to  accomplish  any  such  unlar.ful  end 
(jr  purpose. 

X 

And  respondents  further  say:  That  the  relator,  George  W.  Mayer, 
until  two  days  before  the  annual  election  for  directors  of  the  Waters- 
Pierce  Oil  Company,  was  manager  at  Kansas  City,  Missouri,  for 
the  Standard  Oil  Company  of  Indiana,  and  had  been  for  more  than 
ten  years  nrioi   to  that  lipu ;  that  he  resigned  his  said  position  i^f 


III 


« 


;i8 


IXDrSTKIAl.    COMIUXATIOXS    AND   TRUSTS 


maiiaKiT  for  the  Standard  Oil  C()m])any  of  Indiana  at  Kansas  City 
to  ucrcpt  ck'Ctioii  to  the  Hoard  of  Directors  of  the  Waters-J'ierce 
Oil  Comi)any;  that  his  resifjnation  as  afore>aid  was  in  obedience  to 
the  dictation  of  the  vice-president,  or  pr.sident,  of  the  Standard 
Oil  C'oinj)any  I'f  Indiana,  and  was  a  mire  pretense  to  enable  the 
Standard  Oil  ("omi)any  of  Indiana  throuch  him  by  his  election  to  the 
ho..rd  of  the  Waters- 1 'ierce  Oil  Company  to  j^ain  control  of  the  man- 
aj,'ement  of  the  W'aters-I'icrce  Oil  Company. 

That  the  nlator.  Robert  W.  Stewart,  has  been  attorney  and 
(oiuire!  for  the  Standard  Oil  Company  of  Indiana  aii('  other  in- 
terests .itTiliated  and  associated  with  the  said  Standard  Oil  Company 
of  Indiana  and  the  Slandarrl  Oil  Company  of  New  Jersey,  and  the 
managers  and  slnrkholdtTs  of  said  two  companies;  and  that  said 
Stewart  at  the  instance  and  re(|uest  of  the  otTicers  and  majority 
sharehnhK-rs  of  each  of  said  two  companies  ac.'|ui''ed  a  share  of  stcxk 
in  the  Waters-I'ierce  Oil  Company  in  order  to  enable  him  through 
the  \(ite  and  influence  of  the  Standard  Oil  Company  of  New  Jersey. 
Standard  Oil  Company  of  Indi.i'ia,  and  their  respective  ofiicc ts, 
a^'iiits,  I  mployes  .ind  controlling  shareholders  to  become  a  .(tor 
of  'lie  W'.iters-I'ierceOil  C(/mpany  at  thei'nnual  election  fordut  v  tors, 
to  In  held  on  th  15th  day  of  February,  U)i2,  and  thereby  en.d)le 
the  said  Stand.ird  Oil  Company  of  Indiana,  its  othcers,  agents  aid 
the  holdirs  (if  ihe  majority  of  its  stotk  through  the  ekction  of  >aid 
Stewart  ,ind  said  Mayer  and  .Adams  to  dominate  and  control  in  tlie 
interest  of  said  Standanl  Oil  Company  of  Indiana  and  its  majorit)- 
shap  holders,  otlicrs  .md  agents  the  alTairs  of  the  Waters-I'ierce  Oil 
Company. 


Tile  respondents  aver  that  to  permit  tlie  elect;  n  of  tlie  nlator- 
as  directors  of  the  Watc  rs-l'ier<e  Oil  Company  would  be  to  i)l.ice  the 
atTairs  of  the  W.ittrs-Pit rce  Oil  Comi>aiiy  un  itr  the  ccmiilete  doni 
in.ition  .iiid  (ont.ol  of  the  Sl.mdanl  Oil  Coinp.my  of  Indi.ma,  and 
the  iiuijoritN  owners  of  the  sto(k  of  the  St.iiiilard  Oil  Compan\  oi 
Indi.ma. 

Respondent-  furtlur  -ay  that  ^\<ur  tlir  i  ;,i!i  day  of  Kebruar>-. 
i()0().  a<  din  ted  bv  a  di(  ne  of  tlu  Snpniiie  ( 'ourt  of  Mi  -souri,  in  a 
[)roceedin^  win  rein  the  St.ite  of  Missouri  upon  the  information  of 
the  .Xttormy-Cienend  against  tlie  Waters-I'it  n  e  Oil  (dmpan\.  the 
Standard  Oil  Company  of  Indiana  and  the  Re]iublic  Oil  Compan;. . 
the  iilTairs  of  the  Waters-I'ierce  Oil  Com|mny  have  been  coiiduded 


Kffk'A'A    or   DissoT.UTiON 


519 


ii\  Henry  Clay  ritrcr  and  Clay  Arthur  V'utcc  in  nimplctc  indc- 
pfiidi'na-  of  tlu'  Standard  Oil  Conii)an_\  of  Indiana  and  of  all  other 
coniliinations  whatsoever  as  recjuired  by  the  order  of  the  Court  in 
that  case  to  he  done. 

That  the  Stand.ird  Oil  Company  f)f  Indiana  and  the  Waters-Pierre 
Oil  Com[)any  are  competitors  in  the  busines--  of  MlliiiR  the  produ(  is 
of  [)etro!eum,  as  was  held  in  the  case  above  mentioned,  and  that  if 
the  Standard  Oil  Company  of  Indiana,  throu^rh  the  relators  and 
the  holders  of  the  majority  of  stock  of  the  said  Standard  Oil  Company 
of  Indiana,  should  Rain  control  of  'he  alTairs  of  the  \Vater>-rierce 
nil  Compaiiy,  as  is  projiosed  by  the  relators  in  this  [.roceedm^,  the 
corporate  charlir  of  the  Waters-l'ierce  Oil  Company  will  be  thereby 
forfeited,  and  the  >aid  Henry  Clay  Pierce  and  the  minority  "-hare- 
holders  of  the  Waters-Pierce  Oil  Compan)-  associated  with  him  will 
.-u-tain  f^nat  and  ^eriou--  loss  throuf,'h  the  forfeiture  of  {h.-  chartir 
ol  the  said  Wati  r>-Pierce  Oil  ConijKUiy,  a-  well  a-  in  the  management 
I'l  the  atTiirs  of  tliat  company,  for  that  those  whom  the  rdatnr-, 
r.  present  as  af)re>aid  V  rein  haxc  a  greater  inttTe-t  in  j)ronHilpatin? 
the  succe-s  i ,f  the  Sta  ard  Oil  Comiiany  of  Indiana  than  that  of 
I  lie  Waters-Pierce  Oil  Company. 

Relators  lurther  say  that  on  the  .^oth  da_\  of  March,  i()05,  the  State 
ol  Missouri,  upon  the  information  of  the  Attorney-General,  in- 
Mittited  in  the  Supreme  Court  of  the  State  a  [iroceKiinfj  in  (jiid  uar- 
rmili)  ajiain-t  the  Standard  Oil  Company  of  Indiana,  the  Waters- 
Pierce  Oil  Comjjany  and  the  Re|)ubli(  Oil  Com|)any  from  doinj^ 
bii'-iness  in  the  State  of  Mi^ouri  and  to  forfeit  the  charter  of  the 
Wall  rs-Pierce  Oil  Company  because  ;hey  were  thm  and  had  ther>'- 
tofore  been  en^a^ed  in  a  combination  in  re-traint  of  trade  in  the 
State  of  Mis>ouri. 

That  such  proceeding  wa>  had  in  -aid  case  .i>  that  on  the  oth  dav 
of  March,  njoo.  a  judf,'ment  of  ou>ter  was  entired  in  said  (ause 
.iu'ainsi  tlu'  Stand. ml  Oil  Com[)any  of  Indiana  ..iid  the  Rejiublii  Oil 
Company,  a  non  re^icKnt  corpor.ition.  and  a  judjiment  conditionally 
lorfeitin^'  the  i  barter  of  the  Waters-Pierce  Oil  Company,  a  domestic 
(ori)or,ition,  as  alleijeii       .tie  allern.ilive  writ  henin. 

Ih.'t  from  said  jud'  ent  and  dei  ree  ihe  Standard  Oil  Company 
•  if  Indiana  and  -aid  R,  publit  Oil  ConiiMny  a|>j>e,drd  to  tin  Supreme 
(  oiirt  of  the  Cnited  State-  of  Anutii.i.  and  i)enduin  said  appi.il  a 
Mipersedeas  was  uranted  >aid  ap|Hll.inl,  but  that  no  appeal  was 
taken  therefrom  by  the  Water-  Pierce  Oil  Company,  which,  as  afore- 

id,  -ubmitted  to  -aid  dicree  and  obeyed  the  -ame,  and  jx'nding 


I 


520 


Industrial  Combinations  and  Trusts 


the  said  appeal  a  superst  .eas  was  granted  said  a]^pel!ants;  hut  the  rc- 
afte;,  at  theOr'oher  Term,  iqii,  on  April  i,  Hji2  said  cau,->e  havin>^' 
been  duly  submitted,  the  jud},'ment  of  the  Supreme  Court  of  the 
State  of  Missouri  was  in  all  things  affirmed  by  the  Supreme  Court 
of  the  United  States,  so  that  said  decree  is  now  in  full  force  and  effect 
as  to  said  Standard  Oil  Conii>any  of  Indiana  and  said  Republic  Oil 
Company,  as  well  as  to  said  W  atersT'ierce  Oil  Company. 
That  amongst  other  things,  it  was  decreed  in  said  case  as  follows: 

"Hut  it  is  fu'-ther  considered,  ordered  and  afljudged  by 
this  Court,  that  if  the  ^aid  Waters-Pierce  Oil  C:)mpany  shall 
pay  said  line  to  the  clerk  of  this  court  on  or  before  the  lirst 
day  of  March,  kjoo,  and  shall  immediately  crasr  ell  (OKncriion 
witi'i  the  Si.'i(l  rcspoiuloits  herein  in  continuing  or  maintaining 
said  piiol,  trust  and  consj)iracy  to  fix,  control  and  regulate  the 
prices  of  naphtha,  benzine,  gasoline,  kerosene,  lubricating  oil 
and  all  other  jiroducts  of  petroleum,  and  shall  refrain  from  all 
pools,  trusts  and  combinations,  to  control  the  prices  of  said 
products  of  i)etr()leum,  and  all  combines  and  conspiracies  to 
prevent  competition  in  the  trade  of  buying  and  selling  said 
products  and  shall  furnish  this  Court  with  satisfactory  evi- 
dence of  its  com])liance  with  this  judgment  avd  of  its  intention 
in  !^oo(l  faith  to  eeiisr  all  conneetion  with  its  said  eo-respondents 
herein  and  all  other  parties  or  compani^"-  vhatsocvc"  and  in 
ihc  future  maintain  anil  carry  on  the  business  as  an  independ- 
ent corporation  in  itbedience  to  the  laws  of  this  State  and  lis 
charter,  then  the  judgment  of  the  ouster  ht  rein  shall  be  and 
is  hereby  susjH'nded  and  the  writ  of  ouster  herein  will  not 
issue  until  ex[)ressly  directed  by  the  order  of  this  Court."' 

Res[H)ndents  furthir  pray  |)reference  to  the  said  proceeding  as 
reported  in  Volume  JiSof  the  Olficial  Kejiortsof  the  Supreme  Court 
of  the  State  of  Missouri. 

Re' -pondents  further  say  that  on  the  15th  day  of  February,  iqoq, 
the  \Vaters-l'i( Tce  Oil  Conijiany  filed  in  said  court  the  following  ac- 
ceptance of  -aid  decree,  acconifianied  by  a  duly  i  xemplitied  <o,.y  of 
the  resolution  of  its  Hoard  of  Director--  in  that  bth.ilf,  towit: 

"('■iiius  now  the  Waters- I'ierce  Oil  Comi)any  in  the  above- 
cntiiied  lau^e,  pursuatit  to  the  order  and  judgment  rendired 
herein,  and  tiles  herewith  .1  duly  certiti(<i  ( opy  of  a  resolution 
of  its  Ho.ird  of  I'irectors,  passed  I'ebru.iry  :  ^  njoo    whi  rein 


Ti 


Efficacy  of  DissoLLTiON 


521 


and  whereby  it  agrees  to  accept,  and  does  accept  the  conditions 
of  the  aforesaid  decree  and  a;i;ree.^  to  abidt  l)y  the  same,  anrl 
does  hereby  re.-]»ectf'.i!ly  submit  il>elf  to  the  further  orders, 
judgments  and  decrees  of  this  Honorable  Court  in  and  con- 
cerning the  premises." 

These  respondents  say  that  in  said  cause  it  appeared  that  the 
Standard  Oil  Company  of  New  Jersey  owned  practically  all  <if  the 
■^tock  which  relators  herein  now  claim  is  being  otTered  to  your  re- 
s[)ondents  as  electors  for  them  in  the  Waters-Pierce  Oil  Company, 
namely,  practically  ()()  per  cent  thereof;  that  said  stock  was  then 
registered  on  the  slock  books  of  the  Waters-l'ierce  Oil  Company  in 
the  name  of  M.  M.  Van  Beurcn,  who  ap{)eared  as  owner  and  a  joint 
attorney  in  fact  of  the  electors  whom  the  relators  claim  would  have 
(ast,  if  i)ermitted,  their  voles  for  them.  It  al.-o  appeared  in  said 
cause  that  the  Standard  Oil  Company  of  New  J'T>ey  owned  all  of 
the  shans  of  the  Standard  Oil  Company  of  Inchana,  co-respondent 
of  the  Waters-Pierce  Oil  Com[)any  in  said  cause. 


11 

1 

•   t 

f 
1 
j 

Respondents  say  in  further  return  to  said  alternative  writ  of  man- 
damus that  on  the  i^lh  day  of  November,  rgofi,  the  United  States 
of  America  instituted  a  proceeding  under  an  .vct  of  Congress,  ap- 
jiroved  July  2,  i.'^oo,  entitled  an  "Act  to  Pnuict  I'rade  and  Com- 
iiHTce  again-t  I'nlawful  Restraint  and  Monoj)olie'-,"  commonly 
known  as  the  Sherman  Anti-Trust  law,  against  John  I).  Rockefeller, 
William  Roikifiller,  Henry  H.  Rogers,  Henry  M.  Magler,  John  I). 
Ardibold,  Oliver  H.  Payne  and  Charles  M.  Pratt,  and  other  persons 
.ind  corpt)rations  hereinafttT  named  in  th'-  decree  herein  referred 
to,  >ave  and  excejil  the  Standard  Oil  Ctmiiuny  of  Louisiana  an-'  the 
Magnolia  Oil  Company  and  the  Waters-Pierce  Oil  Company  and 
other  (kfendants,  to  r(--train  them  in  substance  from  continuing  a 
(ombination  and  conspiracy  in  restraint  of  trade  and  commerce, 
among  the  several  States,  in  the  Territories  and  with  foreign  nations; 
tbat  such  proicedings  were  had  therein  tl  it  on  the  20th  day  of 
November,  i()0()  a  decree  was  entered  therein,  .  .  . 


m 


The  re^j)ondents  furtlur  siy  that  an  appeal  was  prosecuted  from 
-.lid  decrei'  to  liie  SujircnK  Court  of  the  lUited  States,  whi(  n  latter 
Court,  after  due  heariu'T.  .ilhrmed  .dl  of  the  said  ijuoted  parts  of  siid 
dicree,  and  in  it>  opinion,  whit  h  roponder.ts  beg  leave  \.u  be  con- 


5- 


Inuustrial  Combinations  and  Trusts 


riih  nd  :i  ])arl  of  this  return  as  fully  as  if  set  forth  herein,  commentinf; 
upon  the  i)l)jections  of  section  0  of  said  flecree,  said: 

"So  far  as  the  owners  of  the  stock  of  the  subsidiary  cor- 
porations and  the  c<iri)orations  themselves  were  concerned 
after  the  stock  had  been  traii>ferred,  section  (j  of  the  decree 
enjoined  them  from  in  any  way  conspiring;  or  conibininp;  to 
\ioiate  \hv  act  or  to  monopoli/e  or  attemjit  to  monopolize  in 
virtue  of  their  ownership  of  the  stock  transferred  to  them,  and 
prohibited  all  agreements  between  the  subsidiary  cor])orations 
or  other  stockholders  in  the  future,  tendinj;  to  produce  or 
biinj;  about  furthtT  violati(jns  of  the  act.  ♦  *  *  We  so  think, 
.since  we  construe  the  sixth  paragrajih  of  the  decree  not  as 
depriving  the  stockholders  or  the  corporations  after  the  dis- 
solution of  th.e  combination,  of  the  power  to  make  normal  and 
lawful  contracts  or  af!;refments,  but  as  re.>trainiiij;  theni  from, 
by  any  device  \\hatever,  recreating,  dire  tly  or  indirectly,  the 
illegal  combination  which  the  decree  dLs-olved.  In  other 
words,  we  con.^true  the  si.xth  paragraph  of  the  decree  not  a>. 
depriving  the  stockholders  or  cori)orations  of  the  riglit  to  live 
under  the  law  ot  the  land,  but  as  compelling  obedience  to  that 
law.  .\s  therefore  the  sixth  paragra!)h  as  thus  construed  is 
not  amenable  of  the  critici-m  directed  against  it  and  cannot 
[)roduce  th<'  harmful  results  which  the  arguments  suggest,  it 
was  ob\  iou-ly  right."' 

T/irsf  rc.s/),)n(/(';r/s  M;y  the  sniil  decree  has  not  been  complied  'with  in 
any  suhstiifitiiil  rc\p  ■/,  tlial  the  individual  defendants  in  that  case.  ai:d 
the  corporations  'ichicn  they  control  throw^h  their  m^-ner^hip  and  control 
of  the  majority  of  the  shares  of  stock  of  the  Standard  Oil  Company  of 
Xru'  Jersey,  at  the  time  saiil  decree  iivi.s  entered,  is  «(>Ti'  (m^ned  and  con- 
trolled by  a  combihction  hetween  said  individual  defendants  mentioned 
tn  said  decree,  their  associates,  confederates  and  allies,  throui^h  the  con 
certed  a,  lion  ir  tt'cir  (mncrsh'p  of  the  stiwk  of  the  Standard  Oil  ( 'ompanx 
of  Indiana,  and  all  of  Ihe  defendant  companies  n-imcd  in  said  decree. ^ 
That  said  combination  continues  as  it  (lid  as  found  in  the  llrst  i)ara 
gr.iph  or  section  of  tlie  decree,  since  the  year  iSoc  when  the  said 
defendants  had  enttT'd  into  and  were  carrying  <nit  a  combination 
or  con-|)iracy  in  i)ur-.u.uicf  whereof  the}'  caused  thi'  lajiit.d  stoi  k  of 
the  Standard  Oil  C'ompanx  to  be  incrtased  to  one  hundred  million 
'  It;ilii.b  art  the  Lditor's. 


•T*-. 


Efficacv  «)«^  Dissolution 


523 


(Idllars,  and  assumed  control  of  all  sub-idiary  companies  through  the 
ownership  of  stock  by  the  Standard  Oil  Comi)any  of  New  Jersey; 
llhil  instead  of  contrail !)ii^  all  the  subsidiary  companies  mentioned  in 
Miid  decree  by  and  throii:j,h  the  Standart!  Oil  Company  of  .\rd-  Jersey, 
the  stockholders  of  the  Standard  (hi  Company  of  ^'eiv  Jerst y  have  re- 
Himed  the  crivncrship  of  the  stock  of  said  subsidiary  companies,  through 
a  pretended  distribution  thereof  from  the  Standard  Oil  Company  of 
Xt'ii'  Jersey,  and  arc  continuing  to  control  all  of  the  '■ubsidiary  com- 
panies through  their  irj.'ner^hip  of  the  majority  shares  of  the  said  sub- 
sidiary companies,  including  the  Waters-Pierce  Oil  Company,  just  as 
they  had  prior  to  the  organization  of  the  Standard  Oil  Company  of 
\rd'  Jtrsev.  as  described  in  section  1  if  said  decree,  hereinbefore  set 
f'rthA 

And  that  the  present  action  of  relators,  supported  by  the  shares 
of  stock  formerly  owned  by  the  Standard  Oil  Company  of  New 
Jersey,  is  an  etlcjrt  ui)on  the  part  of  the  defendants  in  the  aforesaid 
cause  to  assume  control  of  the  Waters-Pierce  Oil  Company  and  draw 
it  into  a  continuation  of  the  conspiracy  enjoined  by  that  decree  and 
compel  it,  through  and  by  an  understandin;^  and  agreement  and 
toncerted  action.  In  and  between  the  holders  of  the  majority  of 
the  shares  of  stock  of  said  subsidiary  companies,  to  continue  to 
\  iolate  the  Federal  law  and  the  said  decree  of  the  Federal  Court. 

That  the  shares  of  stock  set  forth  in  the  alternative  writ  herein 
arc  the  same  shares  of  stock  formerly  held  by  the  Standard  Oil 
Comiia.ny  of  New  Jersey,  and  arc  now  being  attempted  to  be  \()ted 
to  aid  the  furtherance  of  the  conspiracy  enjoined  by  the  decree  afore- 
siid;  that  the  said  individual  defendants  named  in  said  decree  in 
association  with  othtr  confederates  and  allii  -  have  combined  and 
confederated  in  manner  and  form  as  aforesaid,  viz,  through  the 
majority  ownership  of  stock  in  all  the  subsidiar>'  companies  men- 
tioned in  said  decree,  to  control  in  defiance  of  said  dicree,  said  >ul)- 
-idiarv  coqx)rati"iis,  in  omiliinatiun  atid  restraint  of  trade  ai.d  for 
the  j)uq)o f  of  attaining  the  monopoly  enjoined  in  said  ilecree;  that 
■^aid  pretended  dissolution  is  a  farce,  a  disguise  and  a  pretext,  and  has 
made  no  change  uhatsorcer  in  the  relation  oj  ^aid  companies  or  their 
direction,  managenu  nt  and  (ontrolJ 

Wherefore,  rcspondeiil  says  that  the  jurisdiction  and  process  of 
this  (\)urt  should  not  be  given  to  aid  the  relators  and  their  con- 
federates in  a  disguised  attempt  to  evade  the  laws  of  the  United 
Slates  ah  J  the  decrees  herein!  n  fore  referred  to. 
'  It-li  .  .uc  the  ICditor's. 


i>i 


k 


5-M 


Imjlsirial  Combinations  an"D  Trusts 


XII 

These  respondents  further  making  return  to  the  said  alterna- 
tive writ  of  mandamus  ^ay  that  this  Court  has  no  jurisdiction  to 
entertain  this  proccedir.^  or  j^rant  tiie  peremptory  writ  herein,  for 
that  the  relators  have  another  summary  remedy,  provided  by  the 
statutes  of  this  State,  to  contest  their  election  as  directors  of  the 
Waters-Pierce  Oil  Comj)any. 

And  resjjondents  in  further  return  deny  each  anii  every  allevia- 
tion in  the  alternative  writ  not  hereinbefore  admitted  or  denied. 
When  fore,  respondents  say  that  the  vt)tes  and  proxies  otTered 
to  be  voted  by  the  said  Taylor  and  Van  Beuren  and  the  votes 
otTered  to  be  voted  by  rehitors  were  not  lawful  votes  at  said  elec- 
tion, and  were  j)roperly  rejected  by  these  respondents;  and  re- 
spondents, having  made  full  return  to  said  alternative  writ  of 
mandamus,  pray  to  be  hence  discharged  and  to  recover  their  costs 
herein  most  wrongfully  expended. 

Boyle  &:  Priest, 
Judson,  Green  and  Henry, 
Fordyif,  Holliday  cS;  White, 
Attorneys  for  Respondents. 
)i)hn  D.  Johnson, 
O]  Counsel. 


"■^Pfc 


CHAPTER  XVI 

PROPOSED  MF.THODS  OV  UK.VLIXC;  \VI  lH  THK  TRUST  PROi.LKM 

In  this  concludinf^  ihaplL-r,  tiit-rr  have  \,^<jn  i)rou;^ht  toy;eth.T 
tliL'  views  of  certain  jionth  nun  a-  to  llu'  methods  of  dealing  with 
the   Trusts  in  the  United  States.     Compitition  has  its  advocates 


we'll  as  eomijination.     The  exhibit- 


iia 


\e  heen  selected  with  tht 


idea  of  showing  that  there  are  two  distinct  lines  of  thought  in  re- 
gard to  the  Trusts;  one  looking  to  Government  sui)ervision,  the 
other  to  comjjetition  as  an  ultimate  solution  of  the  problem.  It 
has  of  course  been  po^-ible  to  include  the  ideas  of  only  a  comi)ara- 
tivcly  few  men.  but  the  editor  believes  that  the  views  here  ex- 
pressed are  fairly  representative.— Ed. 

Exnnnr  i 

PRESIDI  •  T    WILLIAM    HOWARD   TAFT  ' 
NFAV    RI.MFDIF.S   StT.GF.STF.D. 

Much  is  said  of  the  rei)eal  of  this  statute  and  of  constructive 
Irgislation  intended  to  accomplish  the  purp.ose  and  blaze  a  clear 
path  for  honest  merchants  and  i)usiness  men  to  follow.  It  nay  be 
that  such  a  plan  will  be  evolved,  but  I  submit  that  the  dis.  issions 
which  have  been  brought  ou!  in  recent  days  by  the  fear  of  the  con- 
tinued execution  of  'he  antitrust  law  luive  jJUKluced  nothing  but 
glittering  generalities  and  liaAc  otTered  no  line  of  distinction  or 
rule  of  action  as  detinite  and  as  clear  as  that  which  the  Sui)reme 
Court  itself  lays  down  in  enforcing  the  statuti'. 

SfPPLKAlKM  \I    I.KC.ISI.AIKIN  NKKDKD— NOT  RFPFAI.  OR  AMFNDMFNT. 

1  see  no  objection  and  indeed  I  can  see  decided  advantages — 
in  the  enactment  of  a  law  which  sjiall  describe  and  denounce 
methods  of  competition  which  are  unfair  and  are  badges  of  the  im- 
lawful  purpi  -e  dfiioiuKt  d  in  the  antitrust  law.  The  attempt  and 
purpose  to  suppre>s  a  competitor  by  underselling  him  at  a  price  --o 

'Message  to  ('<m),'rcss  of  IKiumber  5.  lyu.  Congrcssion d  Record,  o^d 
Cong,  id  Scss.  Vol.  48,  pp.  25-26. 

5^5 


m 


.»» 


,20 


IxDusTRiAL  Combinations  and  Trusts 


unprofitable  as  to  drive  him  out  of  business,  or  the  making;  of  ex- 
clu>ive  contracts  with  customers  under  which  they  a;e  required  to 
pive  up  association  with  other  manufacturers,  and  numemu-  kin- 
dred methods  for  stilhnt;  competition  and  etTecting  mcjnopoly, 
should  be  described  with  -ufiicient  accuracy  in  a  criminal  statute  on 
the  one  hand  to  enable  the  Government  to  shorten  its  task  by  pros- 
ecuting single  misdemeanors  instead  of  an  entire  consjjiracy,  and. 
on  the  other  hand,  to  serve  the  purpose  of  pointing  out  more  in 
detail  to  the  business  community  what  mu-^t  be  avoided. 

FEDERAL   INCORPORATION    RECOMMENDED. 

In  a  special  message  to  Congress  on  January  7.  igio,  I  ventured 
to  point  out  the  disturbance  to  business  that  would  probably  at- 
tend the  dissolution  of  these  otTencHng  trusts.     [  said: 

But  such  an  invcstiKalion  and  possible  prosecutf  )n  (if  rorporations  whose 
pr(is[ierit\-  nr  (ie>trui  tion  .ilTeits  the  (nnifort  nol  ohl\-  of  stotktiokicrs  hul  of 
millions  of  wage  earners,  employees,  ami  associated  tradesmen  must  necessarily 
tend  to  disturb  the  conlidenie  of  the  i)usiness  community,  to  dry  up  the  now 
flowing  sourtes  of  capital  from  it^  places  of  hoarding,  and  produie  a  halt  in  our 
present  pro>perity  that  nill  eause  suffering  and  strained  circumstances  among 
the  innocent  many  for  the  faults  of  the  guilty  few.  The  cjuestion  whiih  I  wish 
in  this  message  to  bring  <  learly  to  the  consider.ition  and  disi  ussion  of  Congress 
is  whether,  in  order  to  avoid  such  a  [mssible  busines-  <langer.  something  cannot 
be  dcjne  by  which  these  business  combinations  m,i\-  be  olTered  a  means,  without 
great  fniandal  disturbance,  of  ch.anging  the  character,  organization,  and  extent 
(jf  their  business  into  one  within  the  lines  of  the  law.  under  I-'ederal  control  and 
superv'i^iim,  securing  compliance  with  the  antitrust  statute. 

(ienerally,  in  the  industrial  combinations  <, ailed  "trusts"  the  [)rincipal  busi- 
ness is  the  sale  of  goods  in  many  States  and  iii  foreign  markets;  in  other  words, 
the  interstate  and  foreign  business  far  exceeds  the  bu>iness  done  in  any  one 
State.  This  fact  will  justify  the  federal  (;o\ernment  in  granting  a  Federal 
charter  to  such  a  combination  to  make  and  sell  in  interstate  and  foreign  com- 
merce the  products  of  useful  manufacture  under  such  limitations  as  will  secure 
a  compliance  vith  the  antitrust  l.iw.  It  is  possible  so  to  frame  a  statute  that 
while  it  oilers  [irolection  to  a  T'ederal  com|)any  against  harmful,  vexatious,  and 
unnecosary  inv;ision  by  the  States,  it  shall  subject  it  to  reasonable  taxation 
and  lontroi  by  the  Slates  with  respect  to  its  [)u,ely  local  b\i>iness.    •   »   * 

Corporations  organized  under  this  act  should  be  prohibited  from  actiuiring 
Kill  holding  stoi  k  in  other  corpor.ilions  (except  for  s|,ecial  reasons,  u[M)n  ap- 
pro\ai  l)y  the  proper  I'ederal  authorily).  thus  asoiding  the  ireation  under 
national  aus|)ices  of  the  holding  company  with  subordinate  corporations  in 
dilTerent  States,  which  has  been  such  an  elTective  agency  in  the  creation  of  the 
great  trusts  and  mono[)olies. 

If  the  ;irohibitii>n  of  the  ,uiliiru-l  ,u  I  ug.iiiist  i  ntiibin.Uions  in  restraint  of 
tr.ide  is  to  be  elTettixely  enforced,  it  is  essenli.d  Ih.it  the  .National  (Government 
shall  provide  tor  the  (  reatioii  of  national  ((ir[vir,i  ions  to  carry  on  a  legitimate 
business  throughout  the  Unued  States.     The  to.itlieting  laws  of  the  different 


Mi;! HODS  OF  Dealing  with  the  Tk'  st  Problem 


?'  I 


Slalfs  ot  ihc  Union  wilh  respect  to  icjreign  corporations  make  it  diliicult,  if  not 
impossible,  for  one  corporation  to  comply  with  their  requirements  so  as  to  carry 
on  liii-^inos  in  a  number  of  ditlerent  states. 

1  renew  the  recommcndalion  of  the  enaclmcnt  of  a  general  law 
l>r()viding  for  the  voluntary  formation  of  corporations  to  engage  in 
trade  and  commerce  among  the  States  and  with  foreign  nations. 
Kvery  argument  which  was  then  advanced  for  such  a  law,  and 
every  explanation  which  was  at  that  time  offered  to  i)()>>il)le  ob- 
jections, have  been  confirmed  by  our  experience  since  the  enforce- 
nient  of  the  antitrust  statute  has  resulted  in  the  actual  dissolution 
1)1  active  commercial  organizations. 

It  is  even  more  manifest  now  than  ii  was  then  that  the  denuncia- 
tion of  conspiracies  in  restraint  of  trade  should  not  and  does  not 
mean  the  denial  of  organizations  large  eniiugh  to  be  intrusted 
with  our  interstate  and  foreign  trade.  It  has  been  made  more 
clear  now  than  it  was  then  that  a  purely  negative  statute  like  the 
.mtitrust  law  may  well  be  sujjplemented  by  sj)ecitic  proxi^ions  for 
the  building  up  and  regulation  of  legitimate  national  and  foreign 
commerce. 

i.OVKRXMENT    .\DMINISTRATI\T.    EXPERTS    NEEDED    TO    .\ID    COURTS 
EN    IRUST   DISSOLUTIONS. 

The  drafting  of  the  decrees  in  the  dissolution  of  the  present 
trusts,  with  a  \iew  to  their  reorganization  into  legitimate  corpora- 
tions, has  made  it  especially  apparent  that  the  courts  are  not  pro- 
\ided  with  the  administrative  machinery  to  make  the  necessary 
inquiries  jireparatory  to  reorganization,  or  to  pursue  sui  h  in(|uiries, 
and  they  should  be  emi)owered  to  invoke  the  aid  of  the  Bureau  of 
Corporations  in  determining  the  suitable  reorganization  of  the 
disintegrated  parts.  The  circuit  court  and  the  Attorney  General 
■.vere  greatly  aided  in  framing  the  decree  in  the  Tobacco  Trust 
dissolution  by  an  expert  from  the  Bureau  of  Corjioritions. 

FEDERAL   CORPORATION    COMMISSION    PRoPOSKO. 

I  do  not  set  forth  in  detail  the  terms  antl  .sections  of  a  statute  which 
might  su[iply  ihe  constructive  l^'gislation  permitting  and  aiding  the 
formation  of  conVbinations  of  cai)ital  into  Federal  corporations.  They 
liould  be  subject  to  rigid  rules  as  to  their  organization  and  procedure, 
iiiciuding  etTirti\e  pui)licity.  and  to  ihe  closest  supervision  as  to  the 
i>sue  of  sto(  k  and  bonds  by  an  e\icuti\-e  bureau  or  commission  in  the 
Department  of  Commerce  and  I,a!)or,  to  which  in  times  of  doul  t 


^.'8  IsurSTRIAL    COMBIXATIOXS   AND   TRUSTS 

th.v  miKht  ^vell  submit  their  pn.posed  plans  f..r  future  ^^u^'"^^^-  ^^ 
niu'^t  be  distincUv  understood  that  incr.rporation  under  a  lederal  law 
could  no*  exemi'.t  the  company  thus  [nrnied  and  u>  ine..n.orators 
and  mi..  :rs  from  pro^ecuti..n  under  the  antitrust  law  f^jr^ubst- 
(luent  ilk.oal  conduct,  but  the  publicity  of  it-  j.rocedure  andthe  op- 
portunity for  fraiuent  con-ullati. ..  with  the  bureau  or  ^^^^f^'^'l^^'^ 
■  charge  o'f  the  incor,H,ration  as  to  the  U-itunate  purpose  of  its  trans- 
acims  would  offcT  it  as  «reat  security  a.ainst  successful  prosecutions 
for  violation-  ..f  tlie  law  as  would  be  practicalor  wise 

^uch  a  bureau  or  commission  mipht  well  be  inve-te(  also  with  the 
duty  alreadN  referred  \o,  of  aiding  courts  in  the  dissolution  and  re- 
creation of  trusts  within  the  law.  It  sb.ouhl  be  an  executive  tribunal 
of  the  (liRnitv  and  power  of  the  Comptroller  of  the  Currency  or  '^e 
Interstate  Commerce  Commission,  which  now  exercise  ^uperyl-o^y 
power  over  im])ortant  cla^^es  of  corporations  under  lederal  regulu- 

"xhe  draflin?  of  such  a  Federal  inconx-ration  law  wou  !  otTer  ample 
opiJortunity  to  prevent  many  manifest  evils  in  ^n'orate  >anage- 
ment  to-dav,  mcludin-  irresponsibility  of  control  in  the  hands  oi 
the  few  who  are  not  the  real  ovn  tiers. 

INCORPORATION    VOLUNTARY. 

I  recommend  that  the  Federal  charters  thus  to  be  granted  shall  i  e 
voluntary,  at  lea^t  until  experience  ju>tif.es  mandatory  provisions. 
The  benefit  to  be  derived  from  the  operation  ol  -reat  businesses 
under  the  lu.jtection  of  such  a  charter  w..uld  attract  all  who  are  anx- 
ious to  keep  within  the  lines  of  the  law.  Other  large  combina  ions 
that  fail  to  take  advantage  of  the  Federal  inc(,rTM,ratu.n  will  not  have 
a  right  to  complain  if  their  failure  is  a>cribed  to  unwillingness  to  sub- 
mit their  transactions  to  the  careful  official  scrutmy,  competent  su- 
pervision, and  publicity  attendant  upon  the  enjoyment  ol  such  a 
charter. 

ONLY   SUrPLKMfNTAI.   I.F.GISLATTON    NEEDED. 

The  opportunity  thus  suggested  for  I'ederal  incorporation  it 
si-nn-  to  me.  is  suital)le  constructive  legislation  needed  to  facilitate 
the  s<iuaring  of  great  industrial  enteq^rises  to  the  rule  of  action  laid 
down  by  thr  antitrust  law.  This  statute  as  construed  by  >:  e  bu- 
preme  Court  mu>t  continue  t.)  be  the  liiu^  ol  distinction  tor  1  giiimate 
busine-^s  //  must  he  aihrmt  unk^s  ur  arc  to  banish  nuimduahsm 
fram  all  bmitnss  ami  rcdiur  it  to  our  common  system  of  regulatwn  or 


Mkihods  or   Dealinc,   with     iiic  Tkust  Proi/iem  52Q 


T», 


I  'ittrol  0/  prices  like  that  which  hctu.'  prevails  'dith  respect  to  public 
utilities,  ami  'which  when  applied  to  all  business  would  be  a  long  step 
tim-ard  Stale  socialism.^ 

IMPORTANCE    dl     THE    AMlIRUSi    ACT. 

Tl:-.'  antitru>t  act  is  i;  c  expression  of  the  etlort  of  a  freedom-loving 
people  to  prt-erve  e(|uality  of  oi)])orlunity.  It  i.>  the  result  of  the 
ei,niu;ent  determinatii.ii  of  such  a  peo|)le  to  maintain  their  future 
■growth  by  preserving;  uncontrolled  and  unrestricted  the  enterpri-e 
(if  the  individual,  his  industry,  his  ingenuity,  hi>  intelligence,  and  his 
indepeii  lent  courage. 

For  20  years  or  more  this  statute  has  been  upoi.  the  >tatuti  book. 
Ail  -.new  its  g'^neral  purpose  and  approved.  ^lany  of  its  violators 
were  cynical  over  its  assumed  im[)otence.  It  seemed  imjwssible  of 
enforcement.  vSlowly  the  mills  of  the  courts  ground,  and  only  grad- 
ually (lid  the  majesty  of  the  law  as-ert  itself.  Man\'  of  its  statesmen 
authors  died  before  it  became  a  living  fore-.  .  and  they  and  others  saw 
the  e\il  grow  which  they  had  hoped  to  destroy.  Now  its  etlicacy  i.s 
seen;  now  its  power  is  hea\y;  now  its  object  is  near  achievement. 
Now  we  hear  the  call  for  it>  repeal  on  the  ])lea  that  it  interferes  with 
bu-iness  pr.  p(  rity,  and  we  are  advised  in  mo>t  general  terms  h(-w 
by  -omi-  other  statute  and  in  some  other  way  the  evil  we  are  just 
^tamping  out  can  be  curid  if  we  i.iily  aliandon  his  work  of  20  years 
and  try  another  experiment  for  another  term  of  years. 

It  is  said  that  the  act  b  is  t  >t  done  good.  Can  thi<  be  said  in  the 
face  of  the  effect  of  the  No;  lern  Securities  decree?  That  decree 
was  in  no  way  so  drastic  or  inhibit i'-e  in  detail  as  either  the  Standard 
Oil  decree  or  the  Tobacco  decree;  ut  did  it  not  stop  for  all  time  the 
llun  powerful  movement  toward  the  control  of  all  the  railroads  of 
the  country  in  a  -ingle  hand?  Such  a  one-man  power  could  n^  it  have 
iieen  a  hialthful  influence  in  the  Republic,  eve  though  exercised 
under  the  gemral  supervision  of  an  interstate  commission. 

Do  we  de<ire  to  make  such  ruthless  combinations  and  monopolies 
l.iwful?  \\  ben  all  energies  are  directed,  not  toward  the  reduction  of 
the  cost  of  pnxluction  for  the  public  benefit  by  a  healthful  competi- 
tion, l)ut  toward  new  ways  and  means  for  making  jiermanent  in  a 
few  hands  the  alisolute  control  c\  the  conditions  and  i)rices  prevailing 
ill  the  whole  held  of  industnt-,  then  individual  enterjirise  and  eflort, 
will  be  paraly/.e(^l  and  the  ^i  irit  of  commercial  freedom  will  be  dead. 
buE  VViiiiE  House,  Dnnnher  5,  iQii  Wm.  H.  Taft 

'  Italic-  are  the  E(Jilor's. 


n 


k 


53° 


Inuustriai.  combinations  and  Trusts 


EXHIIUT    2 
SENATOR    ROBERT   \V.    LA    FOLI.ETTE  ' 

A  BILL  To  furlhcr  jjroUct  trade  and  comnK-rcc  against  unlawful 
rc<traint>  and  monopolies. 

Be  it  enacted  h\  the  Senate  am!  House  of  Represenlathcs  of  the 
I  niteJ  States  of  A  merica  in  Cont^ress  assembled.  That  the  act  appro\ed 
Julv  -^ccund,  ci-^htccn  hundred  and  ninety,  entitled  "An  aet  to  pro- 
tect trade  and  commerce  aKain>l  unlawful  restraints  and  monop- 
olies," is  herehv  amended  hy  adding;  thereto  the  follo\vin<j;: 

••Si.<-  ().  Whenever  in  any  suit  or  proceeding,  civil  or  crmunal, 
i)rouuht  under  or  involving  the  provisions  of  this  act,  it  >hall  appear 
that  any  contract,  combination  in  the  form  of  trust  or  otherwise,  or 
con-i)iracv  was  entered  into,  existed,  or  exists,  which  was  or  is  in 
anv  respect  or  to  anv  extent  in  restraint  of  trade  or  commerce  among 
the  several  States  or  with  foreign  nations,  the  burden  of  proof  to 
establish  the  reasonableness  c)f  such  restraint  shall  be  ujwn  the  party 
who  contends  that  said  restraint  of  trade  is  reasonable  _    _ 

"Sec.  io.  Whenever  in  any  suit  or  proceeding,  civil  or  criminal, 
brought  under  or  involving  the  provisions  of  this  act  it  shall  appear 
that  any  contract,  combination  in  the  form  of  trust  or  otherwise,  or 
conspiracy  was  entered  into,  existed,  or  exists,  which  was  or  is  in  any 
respect  or  to  anv  extent  in  restraint  of  trade  or  commerce  among  the 
several  States  or  with  foreign  nations,  such  restraint  shall  be  con- 
clusively deemed  to  have  been  or  to  be  unreasonable  and  in  violation 
of  the  provisions  of  this  act  as  to  any  party  thereto— 

"A.  Wh(/,  in  carrying  on  any  bu-iness  to  which  such  contract, 
combination,  or  conspiracy  relates  or  in  connection  therewith— 

•■  (a)  As  the  vendor,  lessor,  licensor,  or  bailor,  of  any  article  at- 
tempts to  restrain  or  prevent  in  any  manner,  either  directly  or  in- 
directly, any  vendee,  lessee,  licensee,  or  bailee  from  purchasing,  leas- 
ing, licensing,  or  obtaining  such  article,  or  any  other  article  from  s_ome 
other  ]HTson.  or  using  such  article  or  any  other  article  obtained  from 
some  other  person,  whether  such  attempt  ( first)  be  made  by  an  agree- 
ment or  provision,  express  or  implied,  against  such  purchase,  lease, 
license,  or  use.  or  (second)  be  made  b\  a  condition  in  the  sale,  lease, 
license,  or  bailment  against  such  purchase,  lea-^e.  license,  or  use,  or 

2  Rill  introdr.  vd  hv  Senator  T.a  Follplte.  Senate  ,^276,  62nd  Cong,  ist  Sess. 
Cf.  op.  cit.  Senate  (.■nmmittee  on  Intersiate  Commerce  pp.  1778-0^-  ihe  italKS 
are  as  reprinted  in  those  hearings. — Ed. 


Methods  of  Diaiinc.  with  thi:  Trlst  Prohi.km     su 


(third)  Ir-  made  l)y  inipc-in^'  any  nstrirtion  uj^-cn  the  use  of  the  ar- 
ticle so  sold,  lea>ed,  liceii-ed,  or  haili'd,  or  (I'ourthi  he  made  by  making 
in  the  [)rire,  rental,  or  license  any  discrimination  ha-ed  upon  wluthtr 
the  vendee,  lessee,  licensee,  or  bailee  purchases,  hin  s,  or  becomes  a 
licensee  of,  or  uses  any  article  made,  sold,  licensed,  lea.-ed,  or  furnished 
bv  some  other  perstm,  or  (fifth  i  be  made  in  any  other  manner  except 
the  ordinary  solicitation  of  trade; 

"  (b)  As  the  vendor,  lcsst)r,  licensi)r,  or  bailor  of  any  article  at- 
tempts to  prevent  or  restrain  conii)elition  by  m  iking  in  the  price. 
rental,  or  rovaltv.  or  other  terms  of  any  such  sale,  lease,  license,  or 
bailment  any  discrimination  based  uj^on  whether  the  vendee,  le--ee, 
licensee,  or  bailee  purchases,  leases,  licenses,  or  takes  on  bailment 
from  him  articles  of  a  particular  ciuantity  or  aggregate  price; 

•■fc)  As  the  vendor,  lessor,  liceiisor.  or  bailor  of  any  article  at- 
tempts to  prevent  or  restrain  competition  either  by  refusing  to  -upply 
to  any  other  person  reciuesting  the  saine  any  article  sold,  leased, 
licensed,  Ijailecl,  or  otherwise  dealt  in  or  furnished  by  him,  or  by  con- 
-enting  to  supply  the  -ame  only  upon  terms  or  condition-  in  some  re- 
spect less  favorable  than  are  accorded  to  any  other  per,-on; 

"(d)  As  the  vendor,  lessor,  licensor,  or  Ijailor  of  any  article  at- 
temjits  to  prevent  or  restrain  competition  by  supplying  or  offering 
to  supply  to  any  person  or  persons  doing  business  in  any  particular 
territory  articles  sold,  leased,  licensed,  bailed,  or  otherwise  dealt  in 
or  furnished  by  him,  upon  terms  or  conditions  in  any  respect  more 
fa\-orablc  than"  are  accorded  l)y  him  to  his  other  customers; 

■■  (e)  As  the  vendor,  lessor,  licensor,  or  bailor  of  any  article  at- 
tempts to  restrain  or  pre\ent  competition  by  making  any  contract 
or  arrangement  under  which  he  shall  not  sell,  lease,  or  license  an}- 
article  in  which  he  deals  to  certain  persons  or  class  of  persons,  or  to 
thu>e  doing  business  within  certain  districts  or  territory; 

'■  (  f)  If  d  natural  person  docs  business  directly  or  indirectly  under 
au  '  muni'  other  than  his  oii'n  or  that  of  a  partnership  of  7:  Inch  he  /v  ,/ 
member;  or  if  a  corporation  does  business  under  any  name  other  Ihan 
its  ini'n  corporate  name;  or  if  there  he  any  conccahnent  or  misrepresenta- 
tion as  to  the  Ou'}tersl:ip  or  control  of  such  business;  or  if  there  be  any 
misrepresentati'iH  as  to  the  identity  of  the  manujactnrcr.  producer,  vendor. 
or  licensor  of  an\  article  sold  or  leased. 

"!lO  .!,s"  .'/.'('  vendor,  lessor,  licensor,  or  bailor  of  any  article  attempts 
to  prevent  or  destroy  competition  by  supplyint;  or  offering  to  supply  such 
article  without  charge  or  at  prices' at  or  beLm'  the  cost  of  production  and 
dislribiUion. 


.10- 


Inujstrial  Combinations  and   Trusts 


"  (//)  As  the  vendor,  lessor,  lieensor,  or  bailor  of  any  art-ale  spies  upon 
the  business  of  any  <  -npetitor  or  secures  information  concerning  h:s 
business,  either  through  bribery  of  an  agent  or  employee  of  such  com- 
petitor or  of  anv  Stale  or  Federo!  official,  or  bx  any  illegal  means  'uhat- 
sorecr  secures  information  concertiing  the  competitive  business. 

"lf|  (;')  A>  liu-  vir.dor,  lessor,  licensor,  or  bailor  of  any  articlL- 
attempts  to  iiri'xcnt  or  nstrain  competition  by  the  use  of  any  unl.iir 
or  opi)ressive  methods   ;f  competition;  or 

"B.  Who  has  been  sentenced,  or  who  control.^  or  is  controlled  by 
or  is  a  member  of  or  forms  a  part  of  any  coqtoration  or  association 
which  has  been  sentenced  uniler  the  act'  to  remilate  commerce,  ap- 
proved February  fourth,  eighteen  hundred  aiul  ei)^hty-seven,  or  any 
amendmer.t  thereof,  for  any  act  or  thing  relating  to  any  trade  or 
busine^^s  alTected  by  such  restraint  done  or  occurring  after  this  act 
goes  int(;  elTect. 

"The  foregoing  enumeration  of  acts,  conduct,  methods,  and  de- 
vices which  it  is  herein  dechireu  -hall  each  conclu.-i\ely  be  deemed 
unreasonable  does  not  include,  and  :-hall  not  be  construed  to  exclude 
or  as  intended  to  exclude,  any  other  acts,  conduct,  method-,  or  de- 
\ices  which  are  or  may  be  unreasonable. 

'The  i^rovisions  of  clause  ia^  of  thi>  section  sh;dl  not  apply  to  any 
case  where  the  vendor,  lessor,  licensor,  or  bailor  of  any  machine,  tool, 
implement,  or  aiijiliance  i)rolected  by  lawful  i)ateiit  rights  vested  in 
such  vendor,  le->or.  liitn-or,  or  bailo"-  re(juire-  the  purchaser,  les-ee, 
'icensee,  or  bailei'  to  jiurch.a-e  or  hire  from  hi>  cominment  or  con- 


-tituont  parts  of  -i.ch  mac'.iine,'  tool,  imjilenunt,  or  appliance 


which 
■1)1  h  vendee,  lessee,  licensee,  or  bailee  may  thereafter  ac(|uire  during 
the  continuance  of  such  patent  right,  nor  >hall  any  of  the  provision- 
of  this  section  apjily  to  tlu'  mere  apiM)intment  of  sole  agents  to  sell, 
lease,  licen-e,  bail,  or  furni-h  any  article. 

"Sir.  11.  \Vluiu\er  in  any  >uit  or  proceeding,  civil  or  criminal. 
brouuhl  under  or  invohini:  the  i)rovi-ion>  of  thi-  act.  it  -hall  apjiear 
that  any  contract,  ombination  in  the  form  of  tru-t  or  otherwi-e,  or 
con-i>Tacy  wa-  entered  into,  e\i-ted.  or  exists  whi'  h  w.i-  or  i>  in  any 
respect  or  to  anv  extent  in  n  tr.iint  of  tr.ule  or  commerce  among 
the  -cNcnil  Slate-  or  uilh  foreign  n.i'ioi:  ,  are  -hall  at  once  arise  a 
rebuttable  pre-umi)tion  that  su(h  re-ir,iint  wa-  or  i-  unreasonable- 

"(a)  If  in  the  bu>iness  in  (diinection  witii  whii  h  -aid  re-Iraint  ot 
trade  existed  or  exi-t-.  the  person  or  !>(  rsons  engaged  -n  -uch  conlrac  t, 
coml)ination,  or  (on-i)iraiy  (unlrolKd  or  controls,  or  i.-  u  part  of 
'Thiseonslrueti'm  !;,  lliu-  in  tlic  cirii^iiui!.— Kd. 


'^ 


Metikjds  ok  Dealing  with  thp:  Trust  Problem     533 

any  coqioration  or  association  which  controlled  or  controls  at  the 
time  such  restraint  is  allemd  to  have  exi-ted  or  to  exi^t,  more  than 
Inrty  I)er  centum  in  value  of  the  total  cjuantity  sold  in  the  United 
>!ates.  or  more  than  forty  per  centum  in  value  of  the  total  quantity 
-old  in  the  i)art  or  <iis*rict  of  the  United  States  to  which  the  business 
of  such  i)erson.  corporation,  or  association  extends,  of  any  article 
(liali  in  by  such  person,  the  trade  in  which  is  alTected  by  such  re- 
straint. 

■'(!))  Jf  the  vendor,  ussor,  licensor,  or  bailor  of  any  article  with 
a  Mew  to  preventing,'  competition  lixes  an  unreasonably  hi^h  Drice 
upon  any  article  which  enters  into  the  manufacture  of  an  article 
which  is  used  in  producinfJ!  any  other  article  >oId.  lea>>ed,  licensed, 
hailed,  or  otherwise  furnished  by  him,  the  trade  in  which  is  atletted 
by  such  ristraint. 

■'Sic  ij  Whenever  in  any  '-  I  or  proceedin*:,  civil  or  criminal, 
brouj^ht  by  or  on  beh.df  of  the  Government  under  the  provisions  of 
this  act  a  tinal  jadu'inenl  or  decree  shall  have  been  rend.Ted  U)  the 
ctTect  that  a  di'findant  in  \iolation  of  the  i)rovisivins  of  this  act  has 
entered  nto  a  contract,  combination  in  form  of  iru-t  or  otherwise, 
or  ton  jiiracy  in  restraint  of  trade  or  commerce  amonj,'  the  several 
States  i.r  v.ith  foreit^m  nations,  or  has  monoi)oli/i(i  or  attempted  to 
nionojioli/e  or  combinid  with  any  person  or  persons  to  mono|)oli/.e 
aii\  ))art  of  the  trade  or  commerce  amonj^  the  several  States  or  with 
f. Teim;  nations,  the  existence  of  such  illegal  contract,  comiiination, 
nr  con-piracy  in  restraint  of  trade  or  of  such  attemj)!  or  conspiracy 
to  mon(;poli/e,  shall  to  the  full  extent  to  v.hich  the  facts  and  issues 
nf  fact  or  law  wi  ri'  litiizatid  and  to  the  full  extent  to  which  such  fact, 
ludf^nv.iit,  or  decree  would  ((Hi-titute  in  any  other  iiriKcediiiu  an 
i-tojijul  as  i)etwe<n  thi  (iovernment  and  such  person,  cdiistitute 
as  a^^ainst  such  difeiidant  conclusi\e  e\i<Knce  of  llu-  s.ime  fat  ts  and 
be  conclu'-i\e  a-  to  tlu'  same  issues  of  law  in  lavor  of  .my  'Uhei  party 
in  any  other  proceeding  brou^lit  under  (,r  iiuoUini;  the  proxisions 
of  this  act. 

"Sic.  13.  In  any  ci.ii  proitrdinR  bei;un  under  this  a(t  iiy  the 
United  States  or  the  Attorney  (iener.d  or  any  district  altormy 
thereof  in  whi(  h  a  juil)j;ment  or  decree  interloi  utury  or  tmal  has  l/een 
entiTi'd  lh.it  tile  defendants,  or  any  <if  tlieni,  ha\e  bun  i;uilty  of 
conduct  |>roliibited  hy  section  oni',  sectinti  tv.o.  or  -ectinn  thrtc  nf 
thi^  ait,  if  it  sh.all  .liiinar  to  the  to-irt  by  inter\enin^  |)etition  of 
any  other  ]>er-on  or  per-ons  that  mk  h  per~o?i  or  |HTsons  claims  to 
li.ivc   been  iniurcij  by  such  londml.   au  h  ])<r-on  or  person-  -h.iil  be 


III 

1 1  < 


534 


Industrial  Combinations  and  Trusts 


admitted  as  a  party  to  the  suit  to  cstal)li.-h  such  injun,-,  if  any,  and 
the  damages  resulliiif^  tiierefroiii,  and  .^ach  {)erson  or  persons  may 
have  Judgment  and  execution  therefor  or  any  other  ,eli'f  to  the 
same  extent  as  if  an  independent  suit  had  been  brought  under  sec- 
tion seven  of  this  act.  In  the  course  of  such  proceeding  the  court 
mav  Kfant  orders  of  attachment  er  may  appoint  a  receiver  or  may 
take  such  other  imiceedinR  confcjrmaljle  to  the  usual  i)ractices  in 
e(;uity  as  to  in>ure  the  sati>faction  of  any  claim  so  {)re-ented  and  tne 
])rote'ction  of  the  petita)ner's  rights.  Nothing  done  under  this  sec- 
tion shall  be  permitted  to  delay  the  fmal  disposition  of  slid  prin- 
cipal proceeding  in  all  other  respects,  and  nothing  contained  in  this 
r-c'clion  shall  be  taken  to  aljridge  the  right  of  any  person  or  persons 
to  bring  a  sei)arate  and  indejjendent  suit  as  provided  in  section  seven 
of  this  act;  but  if  any  person  jmjceeds  both  by  intervening  petition 
and  bv  independent  suit  the  court  may  order  an  election. 

■'Si';c.  14.  Such  intervening  [)etition  or  an  origmal  suit  for  the 
same  cause  uncJer  section  seven  of  this  Act  shall  not  be  barred  by 
laji-e  of  tiine,  if  begun  within  three  years  after  final  decree  or  judg- 
ment entered  either  in  a  civil  or  in  a  criminal  proceeding  brought 
by  the  United  States  or  the  .\ttorney  (iencral  or  any  district  attor- 
iuy  thereof  establishing  such  violation  by  the  defendant  or  defend 
ant-  of  section  one,  section  two.  or  section  three:  Provided,  That  the 
claim  on  which  :uch  intervening  petition  or  original  suit  is  founded 
was  not  already  so  barred  at  the  time  of  the  passage  of  this  act. 

"Sec.  75.  'i'hdt  \iln-nri-er  ajtrr  llw  in>titution  of  prorfrdini:,s  in  tquity 
under  section  four  oj  tlii-i  act  it  shall  appear  to  t'  >■  court  in  any  prclrr- 
inarv  hearing:,  that  thcr'  is  rra\oii  to  bclicic.  or  upon  final  hearing  the 
the  court  shall  find,  that  any  contract,  coiri'^itMlion  in  the  form  of  trust 
or  othcKu'lse,  or  ionspirtnv  icas  entered  into,  existed,  or  exists,  ahich 
was,  or  ;'*  in  anv  resp''  !  -r  to  any  extent,  in  restraint  (f  trade  or  corn- 
vurce  .nnont^  the  srceral  Slater  ur  'with  foreii:,n  nations,  and  that  as  a 
result  ill'  r,  ol  the  defciulants,  or  any  of  them,  hare  the  control  if  supply- 
inti  the  nun' it  uith  iinv  machine,  tool,  or  other  artiile,  uhethir  raw  »;'/- 
terial  or  manufactured,  reasonably  required  in  the  manutai  'i  r  or  pro- 
duition  of  iinx  other  article  or  for  ii^enera!  consumption  and  u  e,  and  that 
no  adequ  -ti  opportunity  exi\ts  to  immediately  suhstit:de  anuthc  ariii  'r 
Ihoefor  of  equal  utility,  the  court  shall  Inne  piKicr  to  make  such  order, 
b\  injunction  or  otherwise  as  it  tnay  dam  necessar\,  as  will  -secure  !o 
puri  itasers  or  UH'r^  of  ^ui  h  artiile  full  opportu)iit\  to  continue  to  acquire 
or  u\e  the  \ami  upi'n  payment  of  a  teas^'nablc  lompen^atiiin,  .  hcjixed 
b\  the  lourt  in  swh  order,  untd  ■■omi  other  adequate  "■ub^tilute  lan  hi 


Methods  of  Dealing  with  the  Trust  Problem 


s^o:) 


^-('liilal:  Provided,  hoj.'Cicr,  Thai  in  so  far  as  at  the  time  of  the  appli- 
I  'ition  for  sueh  order,  such  machine,  tool,  or  article  is  beinf^  supplied 
til  any  person  under  any  contract,  the  amount  of  compensation  therefor 
tc  he  paid  him  under  said  order  -hall  be  that  actually  payabk  in  accotd- 
(•nce  ivi'h  the  terms  of  such  umtract,  unless  or  until  such  contract  is 
found  or  declared  to  be  void  or  expires. 

'\Scc.  16.  That  uhenrcer  in  any  proceedings  under  section  four  of 
this  act  any  contract,  combination,  or  conspirrcy  has  been  adjudged 
illegal  under  section  one  or  section  tuv  of  this  act  the  court  before  iihich 
^.ich  'proceedings  are  pending  shall  l^ave  jurisdiction — 

'■  I  )  To  partition  any  property  owned  under  any  contract  or  by  any 
combination  or  pursuant  to  any  conspiracy  (and  being  the  subject  thereof) 
mentioned  in  secHon  one  and  section  two  of  this  act  in  sneralty  among 
the  owners  thereof,  or  groups  of  the  oix'ners  thereof,  and  if  the  ouners 
include  one  or  more  corporations,  among  the  sneral  stockholders  thereof, 
or  among  groups  of  the  sneral  stockholders  thereof,  all  in  proportion 
t.,  their  respective  interests. 

"  (/')  //  sales  of  such  property  are  necessary  or  proper,  either  to  pay 
encumbrances  thereon  or  to  recreate  conditions  in  liarmony  with  the 
la'u',  to  sell  such  property  as  a  "whole  or  in  parcels;  and  the  court  may 
forbid  the  said  owners,  and  if  the  uiid  irwners  include  one  or  more  cor- 
porations, the  stockholders  thereof,  from  purchasing  at  such  sales,  and 
may  prescribe  the  conditions  on  which  any  purchase  may  be  made  by 
any  persons  or  corporations  ivhatsorcer. 

'■(()  To  make  such  restraining  orders  or  prohibitions  as  may  be 
nece^-.ary  or  proper  to  recreate  conditions  in  harmony  with  the  la'w,  in- 
dud  ing  prohibitions  of  any  acts,  conduct,  methods,  or  deiices  which  are 
enumerated  herein  as  indicating  unreasonable  restraint. 

"  (d)  To  dcilare  void  as  against  the  defendant.^,  or  any  of  them,  any 
I  ontract  entered  into  as  a  part  of  the  contrac',  combination,  or  conspiracy 
found  to  be  in  restraint  of  trade. 

"The  relief  granted  in  this  section  shall  he  in  addition  to,  and  not 
exclusive  of  other  relief  permitted  by  law  or  by  this  act. 

".Sec.  i~.  That  whenrcer  a  proceeding  in  equity  has  been  instituted 
under  section  four  of  this  act,  anv  person  who  ■^hall  be  injured  or  is 
threatened  with  injury  in  his  business  or  property  by  any  other  person 
or  cor  I  oration  by  reason  of  anything  forbidden  or  declared  to  he  un- 
lawful by  thi'i  ail.  and  anv  Slate  of  the  United  .States,  max  at  anv  time 
in'i'iene  in  siiid  suit  to  protcit  his  interests,  or  if  the  intir.cnor  be  a 
"tate,  the  inlensi^  -d  ik,-  1  iUzens  c/'  w/< /?  Stale,  and  max.  after  final 
accree  in  said  case,  petition  said  tourt  for  protedion  or  redress  in  case 


536 


Industrial  Combinmions  and  Trusts 


()/  any  violation  of  said  decree,  and  the  court  shall  have  po'a.cr  to  take 
such  action  as  D'uix  be  appropriate -n  the  premises. 

'•Sec.  jS.  Wncmver  in  •;  proceeding  under  section  four  oj  thi  act 
it  ':hall  be  alleged  that  the  d,jendanls.  or  any  of  Ihetn,  have  entered  into 
a  contract,  combination  in  the  form  of  trust  or  olhem'i.se,  or  con-  piracy 
or  that  a  conspiracy  bclwren  them,  or  any  oj  them,  existed  or  f.ix-.  wku  h 
jr<jv  or  is,  in  an\  respect  or  to  any  extent,  in  restraint  oJ  trade  or  covi^ 
merce  amon^  the  several  States  or  with  foreit^n  nations,  no  department 
or  official  of  the  I'nited  States  shall,  unless  and  until  ■  iich  alle:^atton 
shall  be  found  on  final  decree  to  be  unfounded,  enter  into  any  contract 
■with  anv  such  defendant  for  the  punhase  or  supply  oj  any  a>::>!e,  n  r 
purchase  from  anv  such  defendant  or  any  other  person  any  ar'-cl,  :anu 
factured  by  any  such  defendant  or  anv  subsidiary  or  controiUu  lompany, 
'association,  or  firm  except  so  far  as  required  so  to  do  b}  some  existiui^ 
control  t,  unless  — 

''First.  The  article  so  mai:uf\h  lured  is  reasonably  nicessary  r  uu 
purposes  of  the  Covernment,  and  no  adequate  opportunity  exists  to 
substitute  another  article  of  eaual  utUitv  at  a  reasonable  price;  and 

-Second.  The  otJicer  authorized  to  make  contnuts  or  purchases  of 
that  nature  ^hall. 'alter  full  in?estis,ation,  and  before  sw  h  contract  or 
purc'tase  is  made,  have  certified  in  writ  ins.  to  the  facts  set  forth  in  the 
preceding  paru^raph  and  have  filed  with  or  maihd  to  the  Department 
of  Justice  and  the  Commissioner  of  Corporations  copies  of  such  cer- 
tificate. .  .  ^  .  , 
'  '-Sec.  iQ.  .\ny  patent  used  in  violation  of  this  act  to  restrain  trade 
or  commerce  amon-  the  several  States  or  with  foreign  nations,  or  used  in 
violation  of  this  act  in  connection  with  any  contract,  conspiracy,  or  cotn- 
bination  in  restraint  ot  such  trad,  or  lommercc.  shall  be  forfeited  to  the 
i'nited  States  and  annulled,  and  mav  be  condemned  by  lihe  procrdmgs 
as  is  pnndded  i>v  law  for  the  forfeiture,  seizure,  nid  cinuUmnation  oj 
properly  imported  into  the  I'nited  States  contrary  to  law. 

"[Vhenrcer.  in  any  proceeding  broui^ht  under  section  jour  f  this  ait, 
it  shall  appear  that  any  patent  granted  by  the  I  'nitcd  States  has  been  so 
used  to  restrain  trade  or  commerce  among  the  several  States  or  with 
foreign  nations,  or  so  used  in  connection  with  any  contract,  conspiracy 
'or  .ominnation  in  restraint  of  ^luh  trade  or  lommerce.  the  court  shall 
have  jurisdiction  to  deilare  smh  patent  forfeited  to  the  L  vited  States 
and  annulled  upon  petition  therefor  duly  filed  in  said  cause,  and  the 
■ittornev  General  shall  frthwith  tile  such  petition  proving  for  suJijor- 
frlture.'and  when  the  defendants  affected  by  such  petition  shall  have 
been  duly  notified  of  the  filing  of  the  same  proceedings  thereon  shad 


Methods  of  Dkalinc  with  the  Trust  Problem    537 


hr  given  precedence  over  others 
signed  for  hearing  at  the  carlit. 


nd  in  r.ery  -ii'ay  expedited  and  he  Oi- 
practicable  day.'' 


Exhibit  ^ 
senator  john  sharp  williams  ' 

A    BILL 

To  ,  escribe  the  conditions  under  which  corporations  may  en- 
gage in  interstate  commiTce  and  to  provide  penalties  for  other- 
wise engaLnnt;  in  the  same. 

Br  it  enacted  l>\-  the  Senate  and  House  of  Representatives  of  the 

nitcd  States  of  America  in  Cong-  ss  assembled,  That  no  corporation 

-tiall  engape  in  lommerce  between  the  States  or  Territories  or  in  the 

District  of  Cohimbia  by  the  [)urcha.--e,  sale,  or  consignment  of  any 

article  of  coinnicrce.  or  otherwi-c,  directly  or  indirectly  — 

First.  Unless  it  is  organized  under  laws  wiih  a  charter  that — 
(d)  State  the  business  in  which  it  is  authorized  to  engage  and 
the  projierties  it  is  authorized   to  acquire; 

(b)  Provide  that  it  shall  have  only  such  powers  as  are  incidental 
to  such  bu>iness,  and  shall  not  have  any  power  to  hold  the  >tock  of 
any  other  corporation  or  association,  to  do  any  act  or  thing  in  re- 
straint of  trade,  or  to  do  anything  outside  of  the  State  of  its  incor- 
l)or;  ''on  which  it  is  not  permitted  U)  do  therein; 

(c)  Provide  that  all  its  stockholders  shall  have  an  equal  right 
to  vote  according  to  the  number  of  share-  held  by  them,  respec- 
ti\(ly,  at  all  meetin!,'s  and  for  all  dire<ti)rs,  subject  to  any  general 
limitation  on  the  number  of  votes  that  may  be  cast  by  a  single 
stockholder; 

(d)  Provide  that  no  other  coryioration,  association,  or  y  "tner- 
ship  shall  ha\c  any  vote  or  voii  e,  directly  >>r  indiretlly,  in  its  af- 
fairs, and  thai  no  person  representing,  directly  or  indirectly,  any 
competing  business  as  owner,  stockholder,  officer,  .m[)Ioyec,  or 
.'.gent  thereof  or  otherw  i  ■•  shall  have  any  such  vote  or  voice,  di- 
rectly or  indirectly  in  its  alTairs  r  be  eligible  as  a  director  or  officer 
thereof. 

(t )  I'rovide  that  its  capital  stock  .-hall  be  fully  paid  or  payable, 
,ind  permit  it  to  he  paiil  in  iiro]H'rty  or  .services  only  when  the  value 
of  such  property  or  s(r\icr-  ii.i^  been  determined  according  to  the 

'  liill  intriviluiiii  liy  Vn;itorJ(i!in  Sli.irp  Williams  Jan  'j,  IQ12.  Senate4747, 
(unci  Cimg.  .'nil  Scss.  1911-1912. 


538 


Industrial  Combinations  and  Trusts 


fact  upon  competent  and  specific  proof  under  oath  filed  in  a  desig- 
nated public  office; 

(f)  Limit  its  surplus  at  any  time  to  fifty  per  centum  of  its  out- 
standing capital  stock  and  its  indchtcdne-^s  at  any  time  to  not  more 
than  its  outstanding  capital  stock  and  surplus; 

(g)  Provide  that  such  :  )rporation  shall  by  an  amendment  of 
its  charter  be  subject  to  and  comi^ly  with,  and,  if  necessary,  shall 
accept  any  requirement  that  may  be  made  by  the  State  of  its  in- 
corporation and  with  any  reciuirement  that  may  be  imt)osed  by 
Congress  as  a  condition  of  its  right  to  engage  in  interstate  com- 
merce. . 

Second.  Unless  it  is  conducted  and  managed  in  conformity  with 
the  said  provisions  and  limitations,  and  is  organized  under  the  laws  . 
of  a  State,  Territory,  or  District  in  wk=-h  its  executive  otTicersare 
located  and  its  dir'ect(jrs'   meetings  regularly  held. 

Third.  If  it,  directly  or  indirectly,  of  itself  or  in  connection  with 
others  destrovs  or  seeks  unfairly  to  stifle  fair  competition  in  an\ 
part  of  the  United  Slates  in  the  manufacture,  production,  mining, 
purchase,  sale,  or  transportation  of  any  articles  of  commerce  n<it 
the  subject  of  any  patent,  copyright,  or  trad.mark  held  by  it  either 
by  making  or  etTecting  exclusive  contracts,  right  ■,  or  privileges 
relating  thereto,  by  restricting  its  customers  or  other  jiersons  with 
regard  to  price,  territory,  or  otherwise,  in  freely  buying,  selling, 
or\ransporting  any  such  article,  by  securing  the  monopoly  or  con- 
trol of  raw  m.-uerial  or  sources  of  supply  or  of  any  business  con- 
nected therewith,  by  temi)orari!y  or  locally  reducing  prices  with 
intent  to  stifle  competition,  by  accepting  rel)ates.  or  by  any  otl  m 
act,  device,  or  course  of  business  that  is  unfair  and  tends  to  secure 
an  unfair  advantage  and  unreasonably  and  unfairly  to  de.-troy 

competition.  r    ,  ■     » 

Sec.  2.  That  every  contract  made  in  violation  of  this  .Act  shall 
be  void,  and  no  corixiration  or  a.  socialion  ^hall  bring  or  maintain 
any  suit  or  prviceeding  in  ,iny  court  of  the  rnite<l  States  unless  ii 
is  organize.;,  conducted,  and  managid  as  re(iuired  by  section  one. 
nor  shall  this  provision  {)revent  the  removal  of  any  such  suit  or 
proceeding  to  svirh  courts  where  such  defense  may  be  available 
to  the  defend. mt. 

Skc.  2,.  Th.it  the  prohiliitions  of  section  one  and  section  two 
shall  apply  to  ai  .'-  ciation  inemb'  ship  in  which  is  represented 
bv  shares,  an.l  the  word  "association  u-ed  in  this  Act  shall  ineiu'i.; 
any  joint-stock  compiny,  business,  trust,  e-^tate,  or  any  form  'it 


Mr.THODs  oi-  Di:\i.t.\r.  with  the  Trust  Problem    539 


association  used  for  business  purposes;  hut  said  prohibitions  shall 
not  ai)piy  to  any  corporation  or  a>s()ciation  not  engaged  i-.  business 
lor  j)rolil  or  engaged  exclusively  in  any  one  or  more  of  the  following 
i)usinesses:  Kducalion;  a  railroad  or  other  common  or  public 
>  arrier  of  projjcrty  or  persons  or  messages;  banking;  insurance;  the 
-upply  of  water,  light,  heat,  or  power;  or  engagecl  exclusively  and 
independently  in  any  business  or  businesses  the  substantial  bulk 
'<i  which  is  carried  on  in  foreign  countries  or  exclusively  in  any  one 
State  or  Territory  or  District,  and  which  does  not  involve  the 
transmission  of  goods  from  one  State  or  Territory  or  Dis^nct  to 
another,  nor  the  purchase,  sale,  or  consignment  of  articles  com- 
monly the  subject  of  commerce  between  the  States  and  Territories, 
and  actually  intended  for  or  becoming  the  subject  of  such 
conmierce. 

Si:c:.  4.  That  no  person  or  persons  shall  form,  operate,  or  act  as 
or  for  a  corporation  or  association  for  the  purpose  or  wi<h  the  ef- 
lect  of  violating  this  Act,  or  conspire  thereto  and  of  themselves  or 
i)y  coconspirator  do  any  act  or  thing  to  elTect  >uch  conspiracy. 

Sfc.  V  That  every  corporation,  association,  trust,  or  person 
violating  this  Act  shall  be  suljject,  upon  conviclior  thereof,  in  case 
oi  a  cor|)oration  or  association,  to  a  tine  not  exceeding  ten  per  cen- 
tum of  its  capital  >lock,  or  to  a  perpetual  injunction  against  engag- 
ing in  interstate  commerce,  or  both,  and  in  the  ca;^e  of  a  ;ierson,  to 
a  fine  not  exceeding  ten  thousand  dollars  for  each  such  xiolation, 
and,  if  the  violation  i>  willful  with  intent  to  defraud  or  to  create  a 
inonopolyor  unfairly  to  siiile  competition,  to  such  Imeand  imprison- 
nu'Ut  for  not  exceeding  live  vears. 

Si:c.  ().  That  the  Act  of  February  eleventh,  nineteen  hundred 
and  three,  relative  to  the  expedition  of  certain  suits  in  equity,  and 
sections  four  and  five  of  the  Act  of  July  second,  eighteen  hundred 
and  ninety,  known  as  the  Sherman  Anti-trust  Act,  shall  api)ly  to 
.dl  proceedings  and  suits  in  e((uity  under  this  Act. 

Stf  7.  'i"i  I  the  purch;i-e,  sale,  t)r  consignment  of  any  article  in- 
line led  to  become  and  a(  tually  becoming  an  article  of  commerce 
between  the  States  or  Territories  shall  be  deemed  to  be  an  .\ct  of 
engaging  in  such  conmierce  under  this  Act. 

■^1  <  8.  That  the  foregoing  provisions  of  this  .-Xct  shall  take  effect 
J.inuary  lirst,  nineteen  hundred  and  thirteen,  but  shall  not  apply- 
to  c(ir])oration-  or  a^-ociation^  having  a  cipital  stock  and  sur])lus 
under  ten  million  dollar.^  uitil  January  first,  nineteen  hundred  anu 
lourteen. 


In 


54©  Industrial  Combinations  and  Trusts 

Sec  9.  That  anv  corporation  or  association  organized,  conducted, 
and  managed  as  rcfiuired  !,y  section  one  shall,  utter  the  passage  ol 
this  Act,  be  entitled  to  engage  in  commerce  between  the  States 
and  Territories,  and  to  carry  on  its  authorized  business  relative  to 
.uch  commerce  in  anv  part  of  the  United  States,  subject  to  the  pro- 
visions of  this  Act  and  to  all  present  laws  of  the  United  States  and 
to  future  Acts  of  Congros,  and  to  the  general  laws  and  taxing 
power  of  any  State,  Territory,  or  District  in  which  it  may  do  busi- 
ness. 

Exhibit  4 

SENATOR  albi;rt  b.  cummins  ' 

A    BILL 

To  further  regulate  commerce  among  the  States  and  with  foreign 
nations,  to  create  a  Trade  Commission,  :nd  for  other  purposes. 
Be  it  nuHled  bv  the  Senate  ami  House  of  Representatives  of  the 
United  States  of  Ameriea  in  Coni^ress  assembled,  That  nothing  con- 
tained in  this  Act  shall  be  construed  to  make  lawful  any  contract, 
combination,  conspiracv.  any  act  of  monopolizing,  any  monopoly, 
anv  attempt  to  monopolize,  or  any  practice,  custom,  or  thing  made 
unlawful  by  either  section  one  or  section  two  of  an  Act  entitled 
"  \r\  Act  to  protect  trade  and  commerce  against  unlawful  restraints 
and  monopolies,"       nroved  July  second,  eighteen  hundred   aiul 
ninety     The  intent  o-  ihis  Act  is  t.)  create  and  maintain  competitive 
conditions  in  commerce  among  the  State,  and  with  loreign  nations, 
and  it  shall  be  construed  liberally  to  accomplish  the  said  intent. 
Sr.c.  J.  That  the  words  enumerated  in  this  section  oball  hdvc  the 
foUo'ving  meaning  when  found  in  this  Act,  to  wit: 

"Commerce"  means  commerce  among  the  States  or  with  foreign 
nation-  •,  that  is  to  say,  such  commerce  as.  under  the  C  institution. 
Congress  has  the  power  to  regulate. 

"ConH)ration"  means  a  body  incorporateu  under  law,  including 
joint-stock  associations  and  all  other  associations  having  shares 
of  capital  or  capital  stock.  r   •    i-   ■  1     1 

"Person"  means  anv  individual  or  company  of  indivuiuals, 
however  associated  together,  except  those  falling  within  the  defini- 
tion of  corporation. 

"  Bill  introcbued  by  Senator  Cummins  Senate  5 4. Si,  62 nd  Congress  .^mi. 
Session.    1911-191^. 


Methods  ok  Dealing  wim  the  Trust  Problem 


541 


II Commission"   means  the  Trade  Commission   herein   created. 

"Capital"  means  not  only  the  capital  owned  by  a  L\)rporation 
or  person  hut  also  capital  borrowed  in  any  form  whatsoever  or 
credit  used  for  business  jiurposes. 

The  Act  shall  ^ot  apply  to  corporations  havinf^  les,^  than  five 
millions  of  dollars  of  capital  nor  to  i)ersons  or  corporations  engaged 
in  the  business  of  common  carriers. 

Six.  ,5.  That  no  cori)oration  organized  after  the  first  day  of 
March,  nineteen  hundred  and  twelve,  or  whose  articles  of  incorpora- 
ti(-n  or  association  are  amended  after  that  date,  nor  any  person, 
shall  engage  in  commercf  employing  s,uch  extent  of  capital  as  would! 
by  reason  of  such  extent,  destroy  or  prevent  substantially  compet- 
itive contlitions  in  the  general  field  of  industry  in  which  such  cor- 
poration is  engaged;  nor  shall  any  corporation  organized  prior  to 
the  lirst  day  of  March,  nineteen  hundred  and  twelve,  engage  in 
commerce  after  the  fi'st  day  of  January,  nineteen  hundred  and 
fourteen,  employing  such  extent  of  capital  as  would,  by  reason  of 
such  extent,  destroy  -.^r  pr.-vent  substantially  competitive  conditions 
in  the  ge.ieni!  field  of  industry  in  which  such  corporation  is  engaged. 

Sec.  4.  lliat  no  corporation  created  or  whose  articles  of  incor- 
poration or  association  are  amended  after  March  first,  nineteen 
hundred  and  twelve,  >hall  engage  in  commerce  upon  whose  board 
of  directors  or  other  managing  board,  or  among  whose  officers  there 
i  any  person  who  is  a  member  of  the  board  of  directors  or  other 
managing  board,  or  ani.;)ng  the  officers  of  any  other  corporation 
carrying  on  a  bu>intss  of  the  same  general  character,  and  which 
therefore  ought  to  be  competitive,  or  who  is  hmisclf,  or  with 
associates,  carr>-iiig  on  any  such  competitive  business.  This  section 
>\va\\  apply  to  corporations  organized  prior  to  March  first,  nineteen 
hundred  and  twelve,  from  and  after  July  first,  nineteen  hundred 
and  thirteen.  If  dummv-  or  nominal  directors  or  offices  arc  placed 
upon  the  board  or  among  the  officers  who  in  fact  represent  and  are 
controlled  by  a  person  or  persons  who  are  themselves  withm  this 
M'ction,  it  shah  be  held  that  the  per-^ons  so  rejjresenting  or  control- 
ling are  on  the  board  or  among  the  otticers. 

Skc.  5.  That  no  corporati(/n  organizetl,  or  whose  articles  of  in- 
cnrj)oration  or  as>()cialion  are  amenditl  after  March  first,  nineteen 


undred  and  trt-elve.  shall  engaLje  in  Kimnierce  which  hold 


,s,  owns, 


li 

or  cuntr()l'-,  dircttly  or  indirectly,  any  >liarr  or  shares  of  capital 
-tock  or  any  (I'ber  means  of  control  of  any  other  coqioration; 
.111(1  no  -orporation  tluretofore  organized  shall  engage  in  commerce 


542 


Industrial  Combinations  and  Trusts 


after  the  first  day  of  January,  nineteen  hundred  and  fourteen, 
which  then  or  thereafter  holds,  owns,  or  controls,  directly  or  indi- 
rectly, any  share  or  shares  of  capital  stock  or  other  means  of  control 
of  any  other  corporation:  Provided,  That  any  such  corporation 
may  ft)r  a  period  of  three  rronths  own  or  hold  shares  of  stock  in 
another  corporation  if  they  have  been  taken  in  satisfaction  or 
partial  satisfaction  or  security  for  bona  tide  indebtedness. 

Sec.  6.  That  no  corporation  shall,  after  January  first,  nineteen 
hundred  and  thirteen,  engage  in  commerce  ui)on  who  e  board  of 
directors  or  other  managing  board,  or  among  whose  ofTicers,  is 
any  person  who  is  a  member  of  the  board  of  directors,  or  other 
managing  board,  or  among  the  officers  of  any  institution  carrying 
on  the  business  of  banking,  whether  >uch  institution  is  incorporated 
or  unincorpo-ated:  Provided,  liowcver,  That  this  section  shall  ap- 
ply only  to  corporations  employing  a  capital  of  ten  millions  of 
dollars  or  more.  The  use  of  dummy  or  nominal  directors  or  ofTicers 
shall  have  the  consequences  prescribed  in  section  four. 

Sec.  7.  That  no  corporation  shall,  after  January  first,  nineteen 
hundred  and  thirteen,  engage  in  commerce,  more  than  ten  per 
centum  of  whose  capital  slock  or  other  means  of  control  is  owned 
or  held  by  any  person  or  corporation  which,  not  being  engaged  in 
commerce,  also  owns  or  holds  ten  per  centum  or  more  of  the  capital 
stock  or  other  means  of  control  of  any  other  corporation  engaged  in 
commerce  and  doing  a  competitive  business:  Provided.  Iion'cver,  That 
if  the  person  or  corporation  not  engageci  in  commerce  acquires, 
owns,  or  holds  such  stock  (»r  other  means  of  control  without  the 
assent,  connivance,  or  participation  of  the  officers  or  directors  ol 
the  corporation  engaged  in  commerce,  then  the  prohiliition  of  this 
section  shall  not  apply;  but,  in  that  event,  the  shares  of  capital 
stock  so  acquired,  owned,  or  held,  shall  have  no  voting  power  in 
control  or  management. 

Sec.  S.  That  no  person  or  corporation  shall,  after  the  first  day 
of  January,  nineteen  hundred  and  fourteen,  engage  in  commerce 
which  owns  t)r  controls,  either  directly  or  indirectly,  or  which 
operates  a  line  of  transportation,  or  which  carries  (m  the  business 
of  a  common  carrier,  and  which  at  the  same  time  carries  on  any 
producing  or  manufacturing  business:  Provided,  Th:it  the  aforesaid 
regulation  shall  not  be  held  to  include  the  ordinary  or  necessary 
switching  facilities  properly  appurtenant  to  a  producing  or  man- 
ufacturing business.  \or  shall  anv  person  or  corporation,  after 
the  date  last  aforesaid,  engage  in  commerce  which  receives,  directly 


Mktiiods  of  Dkali.nc, 


WITH  Tin:  Trust  PR(■iu.^:^f     543 


or  indin.ctly,  from  any  common  carrier  any  part  of  the  freight 
rate  or  char.,  made  and  collected  for  the  traLp ..tation  of  freight 
btc  9.    1  liat  no  per;,on  or  corporation  <ha\\  en-a^e  in  commerce 
which  for  a  penod  of  more  than  two  n.oruhs  regularly  ai^d  g^e  a  ly 
.sells  the  product  or  products  in  which  it  deab,  or  which  it  r^aru 
l.u  tares,  below  actual  cost  for  the  purpose   ^f   intlicting  "brv 
upon  a  competuor,  or  for  the  purpose  of  cimpelling  such  competitor 
tn  cease  carryu-  on  busmess;  and  no  person  or  corporation  shall 
engage  in  commerce  whose  business  it'  is  to  manufacture  or    e 
..nnmodit.es,  unless  he  or  it,  a^  the  case  may  be,  shall  sell  or  ofTe 
to  sell  a  given  commodity  to  all  purchasers  for  substantially  like 
;ld  veries  at  the  s.me  price:  Provided,  hou^rcer.  That  if  the  p  ice 
."i  e  mVv  v""' '''  transportation  from  the  place  of  sale  tJe  sEg 
TJi  ^""'y^^^Z'^'^^  to  the  cost  of  transportation:  And  pro- 
.  fd  further,  Th^  this  section  shall  not  be  held  to  require  the  same 
l-ra-e  lor  carload  lots  and  less  than  crbad  lots. 

Sic.  10    That    no    corporation    organized    after    March    first 
n.netec;n  hundred  and  twelve,  shall  engage  in  commerce  i?  the  p^ 

cXf.  "^  "'  '^'- '^'  f"^,^^'^"^^-^l  indebtedness  or  indebtld- 
■K>^  other  than  current  indebtedness,  amount  in  the  aggregate  to 
a  sum  m.,re  than  ten  per  centum  in  excess  of  the  fair  and  R-afonab  e 
^alue  o  the  property  owned  and  held  by  such  corporation;  and  no 
.orpora  ion  organized  prior  to  the  first  day  of  March  niie^cen 
hundred  and  twelve,  shall  engage  in  commerL  if  hereafter  iliSues 

;     :    ;    , .  o^  uh'T  "■■  '7    "™  ""^  capitalization  the  nominal 
r  j.ar  value  of  which  exceeds  by  more  than  ten  per  centum  the 

;  H;ihlT''"p''''-)'tz  "'"  '^'  ^'''^''''y  '''^^^^^  W  ^he  corpora! 
..on  therefor:  Prov,ded./um>rver,  That  this  section  shall  not  apply 

|.  those  instances  in  which,  through  losses  sustained  in  busiiess 

the  value  of  the  jiioperty  of  a  corporation  may  fall  below  the  aggre- 

gale  amount  of  such  caF)itaI  stock  or  shares  and  indebtedness 

MX.  II  I  hat  no  corj.oration  organized  after  March  first,  nine- 
teen hundred  and  twelve,  .^hall  engage  in  commerce  which  has  paid 
.  ilher  in  money  or  in  the  issuance  and  delivery  of  stocks  or  bonds, 
nrntherwise,  for  services  in  promoting  or  financing,  or  for  any  other 
l-urpose  connect..!  with  the  organization  and  capitalization  of  the 
'  'irr)oration,  more  than  the  following,  to  wit  • 

For  a  capitalization  of  fifty  millions  of  dollars  or  more,  the  sum 
of  one  per  centum  upon  the  capitalization;  ',ut  in  no  event  to  exceed 
one  per  centum  upon  one  hundred  millions  of  dollars- 

l-or  a  capitalization  of  twenty  millions  of  dollars  or  more,  but  less 


'1' 


li{ 


IH 


I 


ill 


I: 


MICROCOPY    RESOLUTION    TEST    CHART 

ANSI  ond  ISO  TEST  CHART  No    2 


1.0 


I.I 


1.25 


145 
l»0 


1^ 


1.4 


25 

[2.2 

2.0 
1.6 


^     APPLIED  INA^GE 


544 


Industrial  Combinations  and  Trusts 


than  fifty  millions  of  dollars,  the  sum  of  two  per  centum  upon  the 
Capitalization;  but  in  no  event  o  t  xcccd  one  per  centum  upon 
fifty  milliuns  of  dollars; 

For  a  cainialization  of  less  than  twenty  millions  of  dollars,  the 
sum  of  three  per  ct'ntum  upon  the  capitalization;  hut  in  no  event 
tu  exceed  two  per  centum  upon  twenty  milli^.n^  of  dollars. 

Sec    12.  That  tlure  i>  herebv  created  a  body   which  Tiall  be 
known  as  "The  Trade  Commi»ii)n."    It  >hall  be  composed  .)f  three 
members.     It  AvdW  be  appointed  by  the  President,  by  and  with 
the  advice  and  consent  of  the  Senate,     '["he  terms  of  their  ..Uices 
shall  be  nine  years,  and  until  th.eir  >ucces>ors  are  appointed  and 
cmalitied:  Provided,  That  of  the  tir^t  three  am^'intees  the  President 
shall  designate  one  who  shall  hold  his  otlne  for  three  years  and  one 
for  six  years,  and  at  the  expiration  of  each  of  such  shorter  terms 
the  aiipointment  shall  be  made  for  nine  year-^.    Vacancies,  h*)W(ver, 
occurriuf:  shall  be  fdleri  1)V  like  appointment  and  conlirmation  for 
tlu'  unexiiir.'d  term.     Kach  of  s;ud  commissioners  shall  receive  an 
•innu  d  salarv  of  ten  lhou>and  dollars.    The  oflice  of  the  commission 
i:,  hereby  established  at  \Va>hin,-ton,   District  of  Columbia,  but 
the  commission  may  hold  meetin.tjs  when  con\enient  or  nece^sary 
elsewhere.    The  duties  and  powers  of  said  commission  are  herein- 
after prescribed.  .         .    ,       ,      .         r        i 
Sic    u.  That  the  Bureau  of  Ciirporations  i-  hereby  transferred 
toanci  merged  in  the  commission,  and  all  olTicers  and  employees  of 
the  Bureau  of  CoriMjratijns  shall  lurealtir  be  the  oflicers  and  eni- 
plovees  of  the  comnii-Mon,  and  with  the  transfer  there  shall  pa>- 
to  the  pos-e>sion  of  the  conimi-ion  all  the  records  and  i)apers  of  said 
bureau,  and  the  commission  shall  hereafter  exercise  all  the  powers 
and  perform  all  the  duties  heretofi)re  conferred  or  imi)o-ed  ui)on 
the  <aid  bur.au:  Provided,  lun-Tccr,  That  all  report-  n^.w  provided 
by  law  to  1h   made  bv  the  bureau  to  the  Pn -ident  Tiall  hereatler 
be  made  to  C"on<;ress  or  as  directed  by  either  Hou~e  thereot. 

.Ml  aiiproiiriations  heretofore  mad.-  for  the  Mipj)ort  and  mainte- 
nance of  the  luireau  shall  -land  a-  ai)i)iopri.'tion>  to  be  expemhii 
by  the  commission  in  the  exeni-e  of  the  powers  and  performan.e 
of  the  duties  wliich  the  law,  i-rior  to  the  passaRC  of  this  Aft,  con- 
ferred or  imposed  upon  vu<l  l)uri.iu. 

Six-.  14.  That  in  addition  to  the  olTicers  and  t  niployccs  now  \^r<y- 
vidcd  for  the  Bureau  of  Corporation^  the  siid  commission  shall 
h.ive  the  jiower  to  employ  such  secretaries,  clerks,  inspectors,  ex- 
aminers, experts,  messengers,  and  other  assistants  a>  trom  turn  to 


Methods  of  Dealing  \mth  the  Tplst  Problem 


545 


iiiiu'  n-.a\-  l)c  nccc.-.-ary,  and  as  may  lie  ai)i>ropriatcd  for  by  Conprcs?. 
With  the  c\ci.i)li()n  of  t^nc  secrclary,  all  the  foregoinq' employees 
-hall  be  a  i)art  of  the  classified  civil  service,  and  >hall  enter' the 
MTvice  under  ^uch  rules  and  re,t;ulations  as  may  be  prescribed  by 
the  commission  hereby  created  and  by  the  Civnl  Service  Commis- 
-i^n.  The  commis-ion  -hall  aUo  have  the  power  to  rent  suitable 
room-  for  the  conduct  of  its  work,  paying  therefor  such  rental  a- 
may  be  ])ro\i(led  for  by  ai)propriation. 

Sec.  15.  That  it  shall  be  the  duty  of  the  commission  to  canfullv 
inquire  into  the  organization  of  all  corporation-  included  within  thi- 
Ai  t  and  w  hich  are  enp;a;,'ed  (jr  which  propose  to  enfraf;e  in  commerce 
aiid  into  the  conduct  of  the  business  of  all  corporations  or  persons 
uigaRed  in  commerce;  and  to  that  end  it  shall  have  the  jiower  to 
-uljMena  and  examine  under  oa*h  individuals.  \o  indi-zidual  may 
ilaim  the  pri\ilege  of  refu-in,i,'  to  answer  for  tlie  reason  that  his 
answer  would  or  might  incriminate  him:  but  his  answer,  if  the  claim 
i.-  made  at  thi'  tinu',  shall  nut  be  u^ed  against  him  in  any  criminal 
proceerling:  but  neither  any  other  per-on  nor  the  coryioration  with 
which  such  indivitlual  i-  connei  ti'd.  whether  as  a  stockholder,  ollicer 
or  agent,  employee,  cnditor,  or  othirwi-e,  shall  I)e  entitled  to  any 
innnuiiity  because  of  any  disclosure  so  made. 

I  he  commission  -hall  also  have  the  power  to  require  the  j)roduc- 
sinn  for  examination  of  all  documents,  contract-,  memoranda,  or 
"ther  |)aiier-  nlaliiig  to  the  commirce  in  which  a  jierson  or  corpora- 
li'Ui  under  in(|uiry  i-  ei\L'aged.  If  the  commission  shall  be  of  the 
'i])inion  that  any  -uih  examination  or  iiKjuiry  sliows  that  there  tuis 
Ik  n  a  violation  of  an\-  law  of  the  I'nited  States  respecting  the  regu- 
lation of  comnurce.  it  >liall  be  it-  duty  to  lay  before  the  Department 
ot  Justice  the  information  it  has  ac'iuirt'd.  to  the  end  that  such  pro- 
■  ■rding-  a-  the  law  requires  may  be  taken  by  the  deiKirtment:  I'ro 
vidal,  /uruTiiT,  That  this  section  shall  not  ai>i)lv  to,  nor  shall  the 
loinmis-ion  Iia\e  any  duty  to  perform  under  or  with  re-])ect  to, 
common  carriers  embraced  within  tlie  .\ct  commonly  known  as  the 
■iitir-tate-conimerce  law.  and  tl,''  amendment-  thertto:  Aiul  pnnidrd 
iKriltir,  That  this  section  shall  not  be  con-trued  to  conlh(  t  with  the 
-pecilic  powers  and  duties  conferred  or  imposed  upon  tlie  comniis- 
-ion  with  risi>ect  to  sections  three,  nine,  and  ten  of  thi-  Act, 

Sfr.  16.  That  the  commis-ion  sliall  have  the  power,  and  it  shall 
be  its  duty,  to  determine  whether  any  person  or  corporation  is  vio- 
lating cither  section  three  of  this  Act.  or  is  violating  sections  one  or 
two  of  the  Act  entitled  ";\ii  Act  to  protect  trade  and  commerce 


II 


546 


Industrial  Combinations  and  Tklsts 


against  unlawful  restraints  and  monopolies,"  in  so  far  only  as  con- 
cerns the  mere  extent  of  capital  em[)lo\r(l;  but  the  power  conferred 
in  this  section  shall  not  extend  to  the  manner,  usages,  customs,  or 
))ractices  in  the  operation  or  conduct  of  a  business. 

The  commission  may  prescribe  rules  for  the  inquiry'  or  examination 
authorized  in  this  section,  which  shall  include  notice  and  hearing. 
In  making  such  in(juiry  and  in  reaching  a  conclusion  thereunder  the 
commission  shall  be  guided  and  controlled  by  the  rules  established 
herein.  When  any  such  inquiry  is  completed  the  commission  shall 
determine  whether  there  has  been  or  is  a  violation  of  section  three 
of  this  Act,  or  whether  there  has  been  or  is  a  \  iolation  of  sections  one 
or  two  of  the  said  Act  entitled  "An  Act  to  protect  trade  and  com- 
merce against  unla.vful  restraints  and  mono])olies,"  in  the  resfjcct, 
and  in  the  resjiect  only,  hereinbefore  set  forth,  and  it  shall  enter  its 
determination  in  a  'ecorrl  kept  for  that  puq)ose.  If  the  determina- 
tion is  that  there  hi.s  been  or  is  a  violation,  as  aforesaid,  then  unless 
the  violation  ceasis  within  a  period  to  be  fixed  by  the  commission, 
the  c<jmmissi()n  may  either  submit  all  its  information  with  its  de- 
termination thereon  to  the  Department  of  Justice  for  such  action 
as  that  department  may  lawfully  take,  or  it  may  institute  in  ihi 
name  of  the  United  States  such  suit  or  suits  in  eciuity  as  are  now 
authorized  by  the  United  Statis  in  the  said  Act  of  eighteen  hundred 
and  ninety,  or  which  are  authorized  by  this  Act  to  be  brought  in 
the  name  of  the  United  States;  and  in  any  suit  or  suits  so  instituted 
l)y  the  commission  in  the  name  of  the  United  States  the  jurisdiction 
of  the  courts  and  the  rights  and  remedies  shall  be  the  same  as  though 
the  suit  or  suits  had  been  instituted  in  the  name  of  the  United  States 
by  or  under  the  direction  of  the  Department  of  Ju-tice;  and  in  any 
such  suit,  whether  brought  by  direction  of  the  Department  oi  Jus- 
tice or  by  direction  of  the  commission,  the  determination  of  the 
conmiission  shall  ha\e  the  same  elTect  as  though  made  1)V  Congress 
itself. 

If,  however,  the  determination  of  the  commission  is  that  there 
has  been  and  is  no  vinl.ition  of  section  three  of  this  Act  and  no  viola- 
tion of  sections  one  or  two  of  the  said  .\i  t  of  eighteen  hundred  and 
ninety  in  the  respect  aforesaid,  thi'n  no  suit  or  action  of  either  civil 
or  criminal  nature  shall  be  brought  or  maintained  by  the  United 
States  alleging  a  violation  of  section  three  of  tlii-  A(t  or  of  sections 
one  or  two  of  the  said  .Act  of  eighteen  hundred  and  ninety  in  the 
rt-|)e(t  aforesaid,  against  which  the  determination  of  the  commis- 
sion is  entered. 


Mlthods  of  Di.alin-g  with  Tin:  Tm^v  Problem     547 

Me.   17.  'I'liat  the  cumniissiun  shall  have  thi  power  and  it  shall 
he  Us  duty  to  (leltrmine  whether  any  corporation  engaged  in  com- 
merce is  ni  yi(;lation  ol  sections  nine  and  ten  oi  this  Act,  and  may 
prescribe  rule,  tor  the  inquiry,  which  rules  shall  include  notice  and 
hearing,  and  m  making  the  inquiry  the  commission  .hall  be  guided 
an(    controlled  by  the  rule  prescribed  by  Congress  in  said  sections, 
and  when  completed  it  shall  enter  --ts  determination  in  a  record  kept 
!'-r  that  puqiuse.    If  the  determination  is  that  the  coq -oration  under 
. Aamination  is  in  violation  of  the  said  sections  or  either  of  them 
and  unless  the  violation  ceases  within  a  period  to  be  fixed  by  the  com- 
ini.sion,  then  tne  commission  may  either  submit  its  information  and 
determination  to  the  Department  of  Justice  for  such  action  a-  that 
department  may  take,  or  it  may  bring,  in  the  name  of  the  United 
Mates,  such  suit  in  efjuity  as  this  Act  authorizes  to  be  brought  in 
the  name  of  the  I  nited  .States  by  or  under  the  direction  of  the  Depart- 
ment of  Justice;  and  the  jurisdiction  of  the  courts  the  ri-^ht^    pro- 
cedure, and  remedies  shall  be  the  same  as  though  the  sui^  were  in- 
-tituted  in  the  name  of  the  United  States  bv  or  under  the  direction 
nl  the  Deparim.  nt  of  Justice:  and  in  any  such  suit,  whether  brought 
hy  direction  of  the  Department  of  Justice  or  by  direction  of  the 
rommission,  the  determination  of  the  commission  shall  have  the 
sime  etlect  as  though  made  by  Congress  itself. 

If  the  determination  of  the  commission  shall  be  against  the  viola- 
tion of  either  of  said  section*  nine  and  ten,  then  no  action  either 
civil  or  criminal,  shall  be  brought  or  maintaine.I  by  the  United  States 
alleging  the  \iolation  against  which  the  determination  of  the  commis- 
sion IS  entered. 

Src.  iS.  That  every  person  or  corporation  violating  any  of  the 
[irovisions  <,1  this  Act,  and  e\ery  p, ts.,,,  who  causes  or  who  a>^Msts  in 
(ausing  any  corporation  to  \iolate  any  of  the  provisions  of  this  Act 
^ hall  be  deemed  guilty  of  a  misdemeanor,  and  on  conviction  thereof 
^liall  be  punished  by  a  tme  not  e\.  eeding  ti\c  thousand  doll.ir*  or 
by  im[)risonnient  not  exceeding  one  year  or  both. 

■  i^'J"..'''''  ^^'^^  ''"  ''^'■'  I"""^'-^'""-^  "f  section  four  of  th(  Act  en- 
titled "An  .Act  to  protect  tradi^  and  commerce  against  unlawful 
•estraints  and  monopolies"  a[)proved  July  .scond,  eiuhle.  n  hundred 
.m(  ninety,  .ind  all  provisions  of  law  rdiiing  to  suits  brought  there- 
under .shall  apply  to  lliis  .Ut  and  to  the  violatio.is  thereof 


n 


548 


InDUSTRIAI-    CoMBINAriONS    AND    TRUSTS 


EXJIIBIT   5 

JVDGE  ELbFRT  H.  GARY  ' 

FEDERAL  IICEN.-^K  ACT. 

Section  i.  No  corporation  cTcatf<l  umKr  the  laws  of  any  State  or 
Tcrritor}-  of  the  United  Slates  (ir  the  District  of  Columbia,  or  an_\- 
foreign  sovereignty,  and  having  cai)ital  stock  or  assets  of  ten  million 
dollars  or  more,  shall  engage  in  trade  or  commerce  between  the 
United  States  and  foreign  nations,  or  among  the  several  States,  or 
between  a  State  or  States  and  places  sulijeet  to  the  jurisdiction  of 
the  United  States,  or  between  any  Territories  of  the  United  States. 
or  in  '.nd  between  such  Territory  or  Territories  and  any  State  or 
States  and  the  District  of  Columbia  or  places  under  the  jurisdiction 
of  the  United  States,  or  between  the  District  of  Columbia  and  any 
State  or  States  and  foreign  nations  or  ])laces  under  the  jurisdiction 
of  the  United  States,  until  such  corporation  >hall  com[)ly  with  the 
re(iuirements  of  this  act,  and  shall  obtain  the  certillcate  of  license 
hereinafter  mentioned:  Provided.  iKmrirr.  That  the  provisions  of  thi- 
act  shall  not  apply  to  any  common  carrier  mentiontd  in  section  one 
(jf  the  act  entitled  "An  act  to  regulate  commerce."  approved  Feb 
ruary  fourth,  eighteen  hundred  and  eighty-seven,  as  amended:  And 
provided  further.  That  corporation^^  In  retof'ore  organized  and  engagid 
in  such  iiusiness  shall  have  one  year  from  the  date  of  the  passage  ot 
this  act  to  comply  therewith  and  to  ol)tain  a  license.  Any  cor])ora- 
tion  which  has  a  cajntal  -tock  or  assets  of  less  than  ten  mi'^MU  dollars, 
which  is  engaged  or  intend>  to  engage  in  interstate  or  foreign  trade 
or  commerce  as  aforesaid,  may  voluntarily  comply  with  the  [)rovisions 
of  this  act  bv  making  ajiplication  for  a  Hcenie.  So  long  as  it  retains 
such  license  anv  such  coqHtration  shall  be  subject  to  all  the  provisions 
of  this  ac  t. 

Si-.c.  i.  In  order  to  comply  with  the  re(|uirt  ments  of  this  act  and 
to  obtain  the  certificate  of  licen-e  In  reinafti  r  menlionid,  the  cor- 
|,oration  apjilving  therefor  <hall  make  an  apl)lication  lor  such  certifi- 
cate of  liceiix',  which  .ii>i>lication  ^hall  specifically  set  forth  (t'lrsti 
the  name  of  the    coriioration,  \\hi(!i  nanu-  -hall  tie  -ubject  to  the 

'  This  t)ill  was  drafted  !)>•  Judne-  dary  and  suhmilted  to  the  Senate  Commit- 
tee on  Interstate  Corainerce  at  I  lie  recjuest  of  ll'.al  boily.  (1.  Hearings  ^efore  the 
Senate  Committee  on  Interstate  Coninieru'  on  ttii-  C'ontml  of  Coqxirations, 
Persons  and  Firms  enKa^ed  in  Interstate  Commerce,  bind  Cong,  jnd  Sess. 
I9lt-iql2,  pp.  2407-241  i. 


MrTiious  OF  Dkaiixg  with  the  Trust  Problem 


i4<) 


ap[)r()val  of  the  Corjwration  Commission;  (second)  the  State,  Terri- 
tory, or  other  sovereignty  under  the  laws  of  wiiich  the  coq)oration 
was  created,  with  the  date  ui  its  creation  and  th  ■  place  in  which  the 
jTmcipal  business  ofi'ice  of  the  coqwration  is  s  tuated,  designating 
die  State,  Territory,  or  district,  and  county  and  otv,  town,  or  village- 
third)  the  objects  for  which  the  corporation  was  estabh.died,  stating 
Me  general  nature  of  the  inter^ate  or  foreign  trade  or  commerce 
vliich  It  intends  to  carry  on;  (fourth)  the  amount  of  the  authorized 
capital  stock  of  the  corporation,  the  amount  of  capital  stock  i.ssued 
.ind  outstanding,  and  whether  or  not  anv  part  of  the  capital  stock 
was  contril)uted  in  ])ropcrty  other  than  money,  and,  if  so,  the  amount 
.if  such  part:  (hfth)  the  numlxr  of  shares  into' which  the  capital  stock 
'^  divided  and  the  par  value  of  such  shares;  whether  or  not  such 
hares  are  divided  into  classes,  and,  if  so,  the  amount  of  each  class 
and  a  statement  of  the  preferential  and  odier  special  rights  of  each 
'lass;  (sixth)  the  number  of  directors  and,  if  iht'v  are  divided  into 
iwo  or  more  cla-se.-,  the  number  of  director--  con^iiuting  each  cla.-s 
.ind  the  terms  of  oflke  of  eat  h  cl. •.--;,  respeclivelv,  and  the  names  and 
post-office  addresses  of  the  directors  and  executive  ollicers  of  the 
.  .)r|)oration  at  the  time  of  the  making  of  such  application;  (seventh) 
the  jKTiod  limited  for  the  duration  of  the  corjinration ;  (eighth)  any 
provision  defining,  limiting,  and  regulating  the  jxAvers  of  the  cor- 
poration, its  officers,  directors,  or  stockholders,  or  of  any  cla>s  or 
classes  of  stockhoMrr--;  (ninth)  the  fact  that  the  application  is  made 
to  enable  such  corporation  to  avail  it^'lf  of  the  advantages  of  this 
act;  (ti'uth)  a  copy  of  the  ccrtilicite  cf  uicorporation  or  charter  of 
the  corjKiration.     Said  application  shall  also  cont.iin  such  other  in- 
lormation  as  nniy  be  required  by  the  Corporation  ("ommission. 

l  he  application  shall  be  sigiu d  in  the  name  of  said  corporation  by 
Its  president  under  authority  of  its  board  of  directors,  and  the  cor- 
porate seal  shall  be  aftixed  thereto  and  atti'sted  by  its  secretary,  and 
the  statements  made  therein  shall  be  sworn  f.>  by  the  president  and 
iria-urer:  and  the  application  so  executed  ar.d'  suorn  to  shall  be 
transmitted  to  the  ("oqioration  Commission. 

Si'.c.  3.  It  shall  be  the  duty  of  tlie  CdriKiratidn  Commission  to 
'  \amine  such  ai>plication  and  to  determine  whether  it  conforms  to 
the  re((uirements  of  this  act  and  contains  anv  j)ro\isi()n  that  is  (on- 
trary  to  any  other  act  of  Congress,  and  whether  the  name  proposed 
to  be  ado!)ted  by  such  corjioratinn  is  the  '^ame  as  or  so  nearly  re- 
I  nibles  the  name  of  any  othir  coqiorafion  already  licensed  under 
this  act  as  to  be  caUulaUd  to  deceive;  and  if  the  organization  and 


II 

II 


550 


Industrlvl  Combinations  and  Trusts 


business  of  the  said  corporation  do  not  involve  any  unlawful  restraint 
of  trade  and  commerce  among  the  several  States  and  Territories  and 
foreign  nations,  and  do  not  constitute  a  monopoly  or  an  attempt  to 
monopolize  said  trade  and  commerce,  the  said  application  shall  be 
filed  and  recorded  in  a  hook  to  be  kept  for  that  purpose;  and  upon 
payment  of  the  license  fees  hereinafter  specified,  said  commission 
shall  issue  a  copy  of  said  application  so  filed,  together  with  a  certifi- 
cate of  the  commission  duly  authenticated  that  the  coriM)ration  has 
complied  with  all  the  provisions  of  law  required  to  be  complied  with, 
and  has  become  and  is  authorized  to  engage  in  interstate  and  ftjreign 
commerce  as  specified  in  its  application.  And  from  the  date  of  such 
certificate  the  said  coqioration  as  such  and  in  the  name  designated 
shall  have  the  right  to  engage  in  inter-tate  and  foreign  commerce,  as 
aforesaid,  unless  said  license  is  re\i)ked  as  hereinafter  pro\ided  for 
cause  shown. 

Sec.  4.  Should  the  Corporation  Commission  refuse  to  grant  a  li- 
cense to  any  corjxjration  under  the  terms  of  this  act,  said  corporation 
may,  upon  such  refusal,  bring  a  suit  against  the  said  Corporation 
Commission  before  the  Court  of  Commerce  or  any  district  court  of 
the  United  States,  which  said  courts  are  hereby  given  jurisdiction 
to  review  the  action  of  said  Corporation  Commissi(jn,  and  if  it  shall 
ajipear  to  the  court  that  said  corporation  has  complied  with  all  the 
terms  and  conditions  of  this  act,  and  that  the  name  of  said  corpora- 
tion is  not  the  same  as  the  name  of  any  other  coryioration  engaged 
'n  the  same  or  similar  business  and  already  licensed  under  this  act,  or 
so  nearly  resembling  'he  same  as  to  be  calculated  to  deceive,  and  if  in 
the  judgment  of  such  court  the  organization  and  business  of  said  cor- 
[xmition  do  n(.t  involve  any  unlawful  restraint  of  trade  and  com- 
merce among  the  several  States,  Territories,  and  foreign  nations,  and 
do  not  constitute  a  monopoly,  or  an  attempt  to  monopolize  said 
trade  and  commerce,  and  are  not  in  violation  of  any  other  act  of  Con- 
gress, the  court  shall  make  an  order  directing  the  said  Corporation 
Commission  to  issue  the  said  license  pursuant  to  law.  The  said  pro- 
ceedings shall  constitute  an  action  in  etjuity  and  be  tried  in  the  >ame 
manner  as  other  actions  in  equity,  and  an  appeal  shall  lie  from  the 
judgment  of  said  court  to  the  Sujireme  Court  of  the  United  States, 
provided  such  ajipeal  be  taken  within  thirty  days  fmm  the  entry  of 
the  judgment.  Upon  any  refusal  to  grant  a  license,  if  the  corfwration 
applying  therefor  shall  thereafter  and  within  thirty  days  institute 
a  suit  as  aforesaid,  the  court  shall  ha\e  authority  pending  the  litiga- 
tion to  enter  an  order  j)ermitting  the  said  corporation  to  engage  and 


Mf.thods  of  Dkai.inc.  with  tiik  Trust  Problem 


^:)| 


such  ccminirrcf  pciidin<,'  the  final  decision  on  such  ap- 


continue  in 
ph'cation. 

Sec.  5.  If  any  coq)oration  which  ha>  obtained  and  maintained  a 
license  under  this  act  shall  subsequently,  pur>uant  to  the  laws  of  the 
place  of  Its  incoqioration,  chanRc  its  name  or  amend  it-;  certi'lcate  of 
incorporation,  it  shall  immediately  lile  with  the  Corporation  Commis- 
sion a  certified  co[)y  of  the  amended  certificate  or  other  document 
evidencing  such  change.  Thereupon  the  commission  shall  i-^sue  an 
amended  license  tu  conform  to  the  change  of  name  or  amendment  of 
the  certilKute  of  ii.coqioration:  Provided,  That  the  new  name  adopted 
()y  said  corporation  shall  not  be  'he  same  .s  the  name  of  any  other 
coqwration  enp;aRed  in  the  same  or  similar  business  and  already 
licensed  under  this  act.  or  so  nearly  resembling  the  same  as  in  the 
opinion  of  the  Coq'oration  Commission  to  be  calculated  to  deceive 
and  the  amendment  to  the  certillcate  (.f  incoriwration  shall  not  con- 
travene any  of  the  provisions  of  this  act. 

Skc.  6.  No  corjwration  licenced  pursuant  to  this  act  shall  carry  on 
the  business  of  di-corntinp;  bills,  notes,  or  other  e\  idences  of  del)t  or 
receiving  dejM.sits  or  buying  and  selling  lulls  of  exchange,  nor  shall  it 
issue  bills,  not-s,  or  other  evidences  of  debt  for  circulation  as  money. 

Sec.  7.  As  a  condition  of  the  issuance  of  any  license  under  this  act, 
the  Corporation  Commission  shall  recjuire  every  corporation  here- 
attcr  organized  applying  for  license  hereunder  to  establish  to  the 
satisfaction  of  the  commission  the  fact  that  no  stock  of  the  said  cor- 
poration was  issued  exce[)t  for  ca^h  or  for  i)ropertv  equal  in  value  to 
the  par  value  of  the  stock  thus  issued,  and  in  determining  the  value  of 
any  property  in  payment  for  which  stock  has  been  issued,  the  Cor- 
|. oration  Commission  shall  not  be  bound  bv  the  decision  of  the  board 
of  (hrectors  of  the  said  corpon:;ion.     To  enable  the  Corporation 
Commission  to  ascertain  the  reasonable  value  of  the  said  property  it 
shall  cause  the  said  corporation  to  file  with  the  commission  a  state- 
ment in  writing,  signed  and  sworn  to  bv  a  majority  of  the  members  of 
the  board  of  directors,  setting  forth:  (a)  .\  full  den'ription  of  the  i)ron- 
erty  in  payment  for  which  the  stock  was  issued;  (b)  the  number  of 
shares  issued  in  p,ayment  for  said  property  and  whether  or  not  such 
shares  have  a  par  value,  and  if  so,  the  aggregate  par  value  of  the 
stock  so  issued,  or  if  not,  then  the  number  of  shares  so  issued;  (c)  the 
names  and  addresses  of  the  vendors  of  the  property  {)urchase<i  or 
accjuired  by  the  cori)oratioii  with  the  stock  so  issued  and  whether  or 
not  they,  or  any  of  them,  were  otl'ieers  or  direct  ^s  of  the  coqioration 
and  ^vhether  or  not  they,  or  any  of  them,  were,  to  the  knowledge  of 


:>:)' 


Industrial  Combinations  and  Trvsts 


the  signers  of  the  statement,  owners  in  their  own  name  or  otherwise 
of  any  shares  of  stock  in  the  corporation,  ami  if  m).  of  how  many  of 
such  shares;  (d)  the  terms  of  any  agreements,  verbal  or  written,  for 
the  transfer  of  such  property  to  the  corporation,  and  the  parties  to 
all  such  agreements,  and  particularly  the  amount  paid  as  purchase 
money  in  cash  or  shares  for  such  property,  specil\ing  any  amount 
payable  for  good  will  and  any  and  all  amounts  paid  to  each  vendor; 
and  in  case  any  written  contract  has  been  made  with  said  \endors, 
or  any  of  them,  a  sworn  cojiy  thereof  shall  be  tiled  with  such  state- 
ment; (e)  in  case  the  vendors  of  such  property,  or  any  of  it,  are  di- 
rectors of  the  corporation  or  owners  of  any  of  its  stock  in  their  own 
names  or  otherwise,  a  statement  of  the  jtrices  paid  by  them  for  the 
j)roperty  so  sold  or  transferred  t(J  the  corporation  and  copies  of  all 
contracts  by  which  the  said  vendors  acquired  the  ownership  or  the 
control  thereof.  In  case  the  stock  issued  in  payment  for  said  prop- 
erty has  a  par  value,  there  shall  be  filed  with  such  statement  with  the 
Corporation  Commis.Mon  an  aj)])raiscment  of  the  value  of  said  prop- 
erty made  by  two  disinterested  ai)praisers,  approved  in  writing  by 
the  Corporation  Commission:  and  the  commis-ion  may  in  its  discre- 
tion ajipoint  one  or  more  other  ap[jraisers  to  make  valuations  on 
such  propertv  and  shall  tix  the  compen>ation  of  such  appraisers, 
which  shall  be  paid  by  the  cor])oration  before  the  issuance  of  any 
license:  and  no  license  shall  be  issued  to  any  corporation  whose  stock 
having  a  par  value  shall  have  been  issued  in  payment  f)f  property 
purchased  or  acciuircd  by  the  corporation  to  an  amount  at  such  par 
value  in  excess  of  the  value  of  the  said  properly  a>  approved  by  the 
Corporation  Commission  after  such  appraisement:  Provided,  hoivrcer, 
That  the  reiiuirements  of  this  section  shall  not  apiply  to  any  corpora- 
tion organi/cd  i)rior  to  the  passage  of  this  act. 

Skc.  S.  No  cor])oration  licensed  hereunder  and  whose  business 
con>titute<,  according  to  the  estimate  of  the  commission,  more  than 
fifty  per  centum  of  the  total  business  of  the  same  character  in  the 
United  States  shall  purchase  the  jiroperty  and  l)usii^.ess  of  any  other 
corporation  or  person  engaged  in  a  similar  competitive  business  in  th^ 
United  States,  unless  the  said  purchasing  corj)oration  shall  llrst  apply 
to  the  Corporation  Connnission,  stating  the  nature  of  the  business 
so  to  be  purch:;--e(l.  the  ])rice  to  be  jjaid  theri'for,  and  such  other  facts 
as  mav  l)e  required  bv  the  commission.  It  shall  thereupon  be  the 
duty  of  the  Corporation  Commission  to  inquire  whether  the  said 
facts  are  true,  and  whether  the  purchase  of  said  yiroperty  would  tend 
to  create  a  monoiioly  in  the  purcha>iiig  corporation  or  to  unduly 


M!;niOD:;  ov  Df.ai.lxg  with  the  Trisi  Probi.kms     555 

rc>t;Jn_ trade  and  commerce  among  the  States  an<l  with  Inrt.-n 
nation,  mxu.lation  of  any  law  of  ConRr.-s.;  and  if,  in  the  oT,inion  of 
he  commission,  such  purchase  would  tend  to  create  a  monopoly  in 
the  purchasm,:^cori)oration  or  to  unduly  restrain  trade  and  commerce 
a>  aforesaid,  then  the  commission  shall  refuse  permission  to  i)urcha^e 
said  i.roperty  and  business,  and  any  purchase  notwithstandinq  said 
refusal  shall  subject  the  said  corporation  to  a  forfeiture  of  its  hcense 
as  hereinafter  i)ro\  ided.  uetiise 

•    ^u^'u'  ^''"^'  '■"'■P^'i'^'-ion  licensed  pursuant  to  this  act  sliall  hie 
in  the  Bureau  ot  Corporations  within  sixtv  days  after  the  hrst  da^'  of 
January,  or  the  hrst  day  of  July  in  each  year,  or  at  such  other  times 
as  the  ( oqioration  Commission  may  prescribe,  a  rejwrt  on  the  con- 
dition of  said  corporation  at  the  close  of  business  on  the  precedinR 
thirty-tirst  day  ol  December,  or  the  thirtieth  day  of  June    a-  the 
case  may  be,  in  such  form  and  setting'  forth  such  details  as  the  Cor- 
poration Commission  shall  from  time  to  time  prescribe,  wliieh  reiH.rt 
shall  be  veritied  by  oath  or  affirmation  of  the  president  or  treasurer  of 
such  cor[)oration  and  attested  by  the  signatures  of  at  lea>t  three  of 
he  ( irectors.     The  Corporation  Commission  shall  alx)  have  power 
to  call  lor  special  reports  from  any  particular  corporation  whenever 
m  Its  judgment,  the  same  shall  be  necessary  in  order  t.)  secure  a  full 
and  complete  knowledge  of  the  condition  of  said  corporation      In 
addition  to  such  reports,  every  corporation  organized  under  the  act 
stia  1  report  to  the  Corporation  Commission  within  ten  days  after 
declaring  any  dmdend  the  amount  of  such  dividend  and  the  class  or 
classes  of  stock  on  which  it  is  payable,  and  a  copy  of  the  statement 
ot  the  hnancial  condition  of  the  corporation  showing  the  amount  of 
the  net  earnings  of  such  corporation  on  hand  at  the  time  of  declaring 
sue  h  diNidends;  which  report  shall  be  attested  by  the  president   vice 
president,  or  treasurer  of  such  cor|)oration. 

Kvery  corporation  which  shall  fail  to  make  and  transmit  any  re- 
port re.|uired  by  tin.  section  shall  be  subject  to  a  penalty  of  one 
himdred  dollars  for  each  day  after  the  period  therein  mentioned 
that  It  continues  in  default  in  the  filing  of  such  report,  said  penalty 
to  be  collected  by  the  Corporation  Commission;  but  the  Corpora- 
tion Commission  may  for  good  cause  shown  extend  the  time  for 
tiling  such  reports  without  penalty  f.jr  a  period  not  exceeding  sixty 
days  All  sums  of  money  collected  for  penalties  under  this  section 
shall  be  paid  int(;  the  Treasury  of  the  United  States. 

Skc.  10  Any  corporation  licensed  hereund  which  seeks  to  in- 
crea>e  the  amount  of  its  capital  stock  shall  first  obtain  the  consent 


554  Inuustrial  Combinations  and  Trusts 


of  the  Corporation  Commission  to  any  such  increase,  and,  as  a 
condition  of  ohtaininj,'  such  consent,  shall  tile  with  the  Cor[)oration 
Commission  a  statement  in  such  fu'm  as  may  he  prescribed  hy  the 
commission,  setting  forth  the  circumstances  of  such  intended  in- 
crease, and  if  such  increase  is  intended  foi  the  jjurpuse  o;  acciuiring 
additional  property,  the  said  statement  >hall  set  forth  the  facts 
specified  in  the  statements  required  by  section  nine  hereof.  Any 
increase  of  capital  stock  of  a  corporation  licensed  hereunder  with- 
out the  tllinL'  of  the  slatenu'iils  and  the  obtaining  of  the  consent  re- 
ciuired  under  this  section  shall  subject  the  said  corporation  to  a 
forfeiture  of  its  license,  as  hereinafter  provided. 

Sec.  II.  In  case  any  corjuiration  licensed  under  this  act  shall  enter 
into  any  contract  or  coml)ination  or  enj^aKc  in  any  conspiracy  in 
restraint  of  trade  and  commerce  anionji;  the  several  States  or  with 
foreign  nations,  or  shall  monopolize  or  attempt  to  monopolize  any 
part  thereof,  or  shall  engage  in  any  oppressive  methods  of  compe- 
tition for  the  purpose  of  obtaining  a  monopoly  oi  said  interstate 
commerce  contrary  to  the  pnni^ions  of  the  act  of  July  second, 
eighteen  hundred  and  ninety,  entitled  "An  act  to  f)rotect  trade  and 
commerce  against  unlawful  restraints  and  monopolies."  i;s  license 
may  be  forfeited,  or  the  said  corporation  may  be  enjoined  from 
the  continuance  of  such  acts,  as  hereafter  more  particularly  pro- 
vided. 

Si:c.  12.  For  the  purpose  of  carrying  out  the  provisions  of  this 
act  and  for  the  pro])er  supervision  of  such  corporations  as  shall  be 
licenseti  hereunder  there  is  hereby  created  a  commission,  to  be 
known  as  the  Corporation  Commission,  which  shall  be  composed 
of  three  commissioners.  The  said  commissioners  shall  be  appointed 
by  the  President,  by  and  with  the  advice  and  consent  of  the  Senate. 
Not  more  than  two  of  said  commissioners  shall  be  ajjpointed  from 
the  same  political  party.  The  first  commissioners  aj.ipointed  shall 
hold  nlt'ice.  one  for  two  years,  one  for  four  years,  and  one  for  si.x 
years,  and  each  commissioner  thereafter  appointed  shall  hold 
office  for  six  years.  No  person  in  the  employ  of  or  holding  any 
official  relation  to  any  corporation  subject  to  the  provisions  of 
this  act,  or  owning  stock  or  bonds  thereof,  or  who  is  in  any  manner 
pecuniarily  interested  therein,  shall  be  eligible  to  hold  such  office. 
Such  commissioners  shall  not  engage  in  any  other  business,  voca- 
tion, or  employment.  No  vacancy  in  the  commission  shall  impair 
the  right  of  the  remaining  commissioners  to  exercise  all  the  powers 
of   the  commission. 


Methods  (;i    Ukai.in,.  urrn   nn:   Trust  r...m.KM     55,- 

dol!:  pi:;  z:;r''""^^  ^'^"  ^^^'^  ^^^^'^-^^  ^^  -'^'^>-  <••  ^-  ^^ousand 

nurre'inniih'""'"'''''""-''^""  ^^^^'^  '^'  ^'"^^''^  ^'"'^  ^^^'tliority  to  in- 
T\  '^•■Kani/atKHi,  conduct,  and  man.  -.mcnt  of  the  bus  - 

til  h        ?;''''".''i^'""^  ''^^"^^^i  under  this  act;  and  said  commisrn 

i^    mliii  ati 'n  '  "  """"  •'"'"  ^^^^  -n-rations  full  ar^S  co^ 
mii;.     t  '^^■^■^■-;i->%  m  Us  ju.lKnunt.  to  enable  the  com- 

pr;;;^;;:'.  t^'!.;;'""' '■  ^^^'^^^^^  ^^  ^^-^^^  -^  -^--  ^^^ 

Sh;c.  12.   '  The  said  commission  shall  have  the  same  nower  of 

n|iu.ry  over  connnerce  conferre.i  upo..  tlK-  Bureau  of  Con  ^ru  io 

i  Hler  the  act  crealm^r  the  Dep^artment  of  Co.nmerce  and  L  bor 

approved   I-ebruary    ourteenth.  nineteen  hundred  and  thr^c      n-' 

itnlsl     ■  '?'.';,'■ '"  '"f'  -''IH-naes  ■  to  con,pel  the  .ttenda.ce  .  f 

u  tnes>e.  and  the  j.roduction  of  documentary  evidence    and   to 

S  nedt'^:;./  h'  '"'  -7,--ail  itself  of  all  {he  infor,?i;t;:^o^ 

bu       n  uh  '''''  ''"'^  '^'■''^  investigation  to  be  made  bv  said 

ureau  uhen  necessary  to  assist  said  comnnssion.    All  the  require^ 

.■.Us   obh^afons,  Habili-.s,  and  immunities  imposed  by  th d 

hclnte^  t  ?";"""■  ^'"^^A^^'  '^'  '''  '"  ^^■'^^'""  to\e.timo'nv  bef^  e 
h(  In  erstate  Commerce  Commission,  and  by  the  act  to  create  the 

ta^^-  Ivi<i^^       "''^  '"  ''''">■  ^'  witnesses,  or  to  produce  documen- 
tao  evidence  in  pursuance  of  the  authority  conferred  by  this  act 
^w.  1,3.  Any  person,  tirm,  corpora. ion,  company,  or  associition" 
or  any  mercantile,  agricultural,  or  mauuiactu  ing\oc  i^r  Xr 
organization,  or  any  bo.ly  politic  or  municipal  organization     on 
plaming  ot  anythmg  done,  or  omitted  to  be  done,  by  any  con  or  - 
t.on  subject  to  the  provisions  of  this  act,  or  compla  nhS  tha      ny 
such  corporation  has  entered  into  any  contract  of  con.bina   on   o^ 
engaged  in  any  conspiracy  in  restraint  of  trade  or  commerce  among 
he  several  States  or  wUh  foreign  nations,  or  has  monopolize  "r 
attempted  to  monopolize  any  part  thereof,  or  is  engaged   r,  .nu    e 
sive  or  unfair  methods  of  competition  for  the  purpose  of  mnS;: 
ihisact  or"  nir^rr^r^  ^'"^'"!  '""'--;  to' the  provisi^'    f 
;     '    •  .  f^  "^  ■^^'^'  '''''''''^'  ^■'^''^^^■^■"  hundred  and  ninety, 

entitled.     An  act  to  protect  trade  an.l  commerce  against  any  un 
awful  restraints  and  monopoli.,.."  ,,,y  ,,,piy  ^o  said  comm  .sion 
by  petition,  which  shall  brielly  stale  the  facti,  whereupon  i^  shall 
'  Thus  in  originul.— Ed. 


-^5^ 


Industrial  Combinations  and  Trusts 


he  the  duty  of  the  said  commi^'^ion,  at  such  time  and  place  as  the 
comnii>>iini  >hall  tleterniine,  alter  notice  to  such  cor])oraiion.  to 
inciuirc  into  Jie  subject  matter  ni  said  coin[)laint,  and  the  commis- 
sion is  herein-  autlKjrized  in  like  manner,  upon  its  own  motion,  to 
institute  and  j)r()^ecute  any  investigation  of  the  acts  of  such  cor- 
poration. And  saiil  commission  shall  ha\-e  the  same  powers  and 
authority  to  proceed  with  any  incjuiry  on  its  own  motion  as  though 
it  had  been  apiiealed  to  on  complaint  or  petition  undc  r  any  provi- 
sions of  this  act.  Whenever  any  investigation  shall  be  made  by 
this  commission  under  the  terms  of  thi>  act.  it  shall  be  its  duty  to 
make  arcl  tile  :mi  order  embodying  the  conclusions  of  the  commis- 
sion, l(  gether  with  its  decision  or  rccjuirem.cnt  in  the  prem- 
ises. 

The  said  commission  shall  have  authority  by  its  order  to  require 
any  cx)rporation  licensed  hereunder  to  desist  from  any  violation  oi 
this  act  or  of  the  act  of  Ju.>  second,  eighteen  hundred  and  ninety, 
entitled  ".\n  act  to  protect  trade  and  c  -mmerce  against  unlawful 
re.-'traints  and  monoiiolies,"  and  may  in>titute  proceedini:s  in  any 
district  court  of  the  I'nited  States  or  in  the  '"ourt  of  ComnuTn  lor 
the  forfeiture  of  the  licei.  of  said  corporation,  <.r  to  enjoin  the 
corporation  from  such  violation,  and  said  courts  are  hereby  given 
jurisdiction  upon  the  institution  of  any  such  proceedings,  either  to 
grant  an  injunction,  to  decree  to  '  forfeiture  of  a  license,  or  to  make 
>uch  other  decree  as  justice  and  ecjuity  may  reciuire. 

Si;r.  14.  Uniler  the  pro\i>ions  of  this  a<  t  there  shall  hv  paid  to 
the  Corporation  Ccnnmis-ion  for  the  use  of  the  Cnited  States  the 
following  fees:  Fir>t,  upon  the  tiling  and  appnn-al  of  any  applica- 
tion for  license  hereunder  an  amount  e(|U.d  to  one-tenth  of  one  per 
cent  of  the  total  .luthori/i'd  capital  of  >au\  corporation  uj)  to  ten 
million  dollar-^;  one  twentieth  of  one  per  cent  of  all  ca])ital  in  excels 
of  ten  million  dullar--;  and  up  to  twenty  million  dollar^-;  two  hun- 
dred and  I'lfty  dollar-  on  i\ery  million  dollar-  or  \v.h  iion  tin  reul  ol 
capital  in  exc'ess  of  twentv  million  dollars;  an  1  the  like  fee-  uixm  the 
li'ing  of  anv  certiticate  of  increase  of  the  cai)ital  >tock  upon  the  to- 
tal amount'  of  such  increase.  Second,  in  c.iso  any  cori)oration  is 
licensed  hereunder  with  tlie  whole  or  a  part  of  its  capital  stock 
ha\ing  no  par  value,  then  then'  ^hall  be  paid  upon  the  tiling  and 
.il>l)rov,il  of  the  api)lication  lor  liceii-e  or  ol  .my  certiticate  of  in- 
crease of  capital  .1  fee  eciual  \<>  two  and  oiu-half  cents  for  tadi 
aliquot  part  of  the  uipitai  .li  ilir  >  ..rin.ration  represented  by  each 

'  I'im.-  it!  orii^iiiai.  —lid. 


Methods  of  Dkaung  with  -ui:  Trust  Problem     557 

of  the  shares  nut  having  a  par  value,  but  in  no  instance  shall  ^uch 
tee  be  less  than  two  hundred  and  fifty  dollars. 

Si;c.  15.  Any  corporation  licensed' hereunder  niav  api)iv  to  the 
commisHon  at  any  time  for  a  determination  as  to  uhethe'r  or  not 
any  i.ropc.sed  action  of  such  licensee  would  undulv  restrain  trade 
<.r  commerce  or  create  a  monopoly,  an.l  the  commi^ion  shall  there- 
upon myestisate  and  make  an  order  allowinR  or  prohihitinR  such 
propose.l  action,  and  any  action  taken  hv  anv  corporation  pur- 
suant to  such  order  shall  he  lawful;  hut  such  order,  as  to  its  future 
operation,  shall  he  subject  to  revocation  upon  notice.  In  connec- 
tion with  any  order  allowing  such  pro[)osed  action  and  as  a  condi- 
tion 01  granting  the  same,  the  commission  may  li;.  the  maximum 
prices  ot  any  products  with  reference  to  which  the  order  is  made 
It  ill  the  judgment  ot  the  commission  the  fixing  of  such  price  shall 
be  necessiry  to  prevent  a  mono[)()ly  or  an  undue  restraint  of  trade 
or  commerce,  an.l  the  prices  so  tixed  shall  govern  the  said  licensee 
so  long  as  the  order  is  in  force. 


ExiiiniT  6 

ANDRKW    CARNrr.n    • 

In  other  words,  there  >houl<l  pn.mptlv  !..■  created  an  industrial 
court,  molded  alter  the  Interstate  C.mmerce  Commission  and  Court 
of  Commerce,  charged  with  all  questions  connected  with  manufac- 
ture and  natural  i.roducts,  since  the  Interstate  Commerce  Commis- 
sion IS  already  fully  occupiul  with  its  own  field,  but  as  the  Com 
nurce  Court  is  not  kept  busy  with  ai.peals  it  might  be  the  court 
of  appeal  for  the  industrial  court  as  well  as  for  the  Interstate  (  oni 
merce  Commission.     To  prove  the  y>ressing  necissitv  for  the  tw.. 
judicial  (jrganizations  already  formed,  in  contrast  t.^  the  .Supreme 
C.mrt.  whuh  wailed  several  years  before  an  imp(-rtant  issue  came 
betore  it.  the  Interstate  Co-imerce  Commission  has  alreafiv  sat  in 
judgment  upon  the  greatest  of  all  organizations,  the  IVnn:vlvania 
Kailr. Md  C  o.     It  a^ked  to  be  permitted  to  advance  its  rate' in  one 
d.p.irlment.     After  investigation    the   replv    in    the  negative   was 
promptly  accepted  by  the  suitor,  no  app..il  i.,k,n.  who  thus  set  all 
companies  an  excellent  example. 

To-day  the  Commerce  Court  is  hearini,'  (oun-rl  ,.,1  the  tran-cor 
linental  railroads  who  asked  an  iniuiK  tl,,n  n-iraining  an  order  of 

'  lleuring,  hvUm-  the  Commiucc  on  InvesliKalion  of   United  SUtes  Steel 
Corporation,    o^ml  (<..,«.  .nd  Scss.  iQU-igi^.  ,,p.  ^347-^348 


.">0 


S 


Industrim.  Comhinations  and  Trusts 


the  Interstate  Commerce  Commission  construing  the  long  and  short 
haul  clause.  Thus  the  work  goes  l)ru\-ely  on.  The  reign  of  law  is 
steadily  being  evolved  as  precedents  are  estatlli^hed.  The  industrial 
ccnirt  need  not  fix  all  jirires.  Its  province  should  be  to  examine  all 
details,  ascertain  cost  of  production,  adding  to  such  amount  as  in 
its  judgment  will  \  ield  a  fair  or  even  liberal  return  upon  cajjital 
when  skillfully  in\-e>ted  and  i)roperly  managed;  the  maximum  sell- 
ing price  to  consumers  to  be  fixed  by  the  court,  based  ui)on  the  aver- 
age cost  price  of  product  in  up-to-date,  well-managed  works.  There 
may  be  found  poorly  constructed  or  conducted  works  in  all  branches, 
which  the  coarl  should  not  consider  in  i'lxing  proper  maximum  price. 
Such  should  be  compelled  to  reach  standard  ptrfornKUue  or  sutler 
the  consequences  of  mi>management.  The  court  should  not  become 
an  eleemosynary  institution  to  avert  f:ulure  of  those  who  fail  through 
inattention  or  mismanagement.  It  may  be  urged  that  this  would 
])revent  ecjual  returns  to  owners,  which  is  true.  Any  works  which 
can  not  etjual  avt  rage  cost  and  still  have  part  left  of  the  profit  al- 
lowed by  the  court  no  nursing  is  likely  to  improve:  the  sooner  it 
passes  into  comju'tent  hand>,  the  danger  of  monopoly  being  avoided, 
the  better  for  the  countrx-  and,  as  a  ruk,  the  better  for  its  owners. 
I'"ailures  now  and  then  in  l)U>iness  there  always  ha\e  been  and  always 
will  be  as  long  as  men's  powers  and  halnts  radically  ditTer. 

WhiU  of  opinion  that  little  or  no  action  is  needed  at  jircsent  be- 
vond  the  organization  and  lUvelopnunt  of  an  industrial  court.  1 
am  far  from  believing  that  ,rom  time  to  time,  as  we  gain  experience, 
new  rules  .ind  some  change--  will  not  he  found  a<lvi^ablc  and  even 
necessary  from  time  to  time  to  keep  in  harmony  with  inevitable 
and  probably  surjirising  development-  of  the  future.  Our  countrx- 
has  not  ceased  develo])ing.  We  shnuM  unhesitatingly  pursue  the 
course  here  indicated  for  the  j)reseiit,  and  await  further  develop- 
ments and  be  guided  accnrdingly.  It  i-  certain  that  our  legislator-, 
sustained  by  tlie  people,  who  only  need  to  be  kept  fu'Iy  informed  ol 
all  steps  taken,  can  and  will  in  due  time  bring  harmony  out  of  present 
dixdrd,  reconstructing  through  the  reign  of  law  the  old  and  itresent 
indu-tri.il  systems  by  contimial  improvements  therein,  all  tending 
to  draw  labor  and  cajiilal,  producer  and  con-unur,  into  closer  and 
more  -atisfactory  relations  than  have  ever  before  existed  between 
them. 

Me.mwhile,  let  us  |)rove  to  the  count rx-.  and  especially  t.  the 
masses  of  the  ])eople.  that  we  are  on  the  p.ith  of  carelui  i>ui  -h  idy 
progress  to  the  advantage  of  all  ihe  memlur-  ot  tin   !iidi-])ensible 


Mkiiiods  of  Dkalixg  with  the  Tkist  Problem     559 
<|uartct-lal,or   capita!,  consumer,  producer-the  intcu-t.  of  vhirh 

It  is  far  from  being  of  the  first  importance  to  punish  men  in  this 

us  S;l    ^  ""  '•"'■''',  ^^^  ^'^'I'''^''  '"^"^■^^^■^''  "••  violated  recent 

c  r   hen    id  n  V     ^^■'.""\^""'  ^"'"«f^'  "^^  concealment.    The  pro- 

1  c     un  , '"''^""'  ^'  ^'"-^  ^  wrongdoer.    He  followed  recog- 

...ul  cu>tom,  and  even  ra.hvay  oiricial>.  fighting  in  their  day  for 

thcr  respective  companies,  urged  that  the^  only'nul  the  prSs  o 

competitors,  were  somewhat  in  the  same  i^Jsition  ' 

(•.^^"iluM    f""i!"  ia-  has  I,een  so  far  interpreted  hy  the  Supreme 

h.ch  he  dK   innocently  l,efore,  hut  just  what  he  can  and  can  not 

he   if  h  ,      )    r^"  ^'V""«l-    it  is,  however,  not  punishment  for 

he  past,  but  obedience  in  the  future  to  clearlv  defined  law,  which 

.one  can  bring  to  the  realms  of  commerce  and  indu>trx-  th  ■  pe  ce 

h.  h  our  railway  system  now  enjoy.    To  thi.  consummation  lo 

o^^'si^  ci^ir^^i^r  ^^'^' '-''  ^'"^  ^"^^^- '"  ^^  - '-- 

Exhibit  y 

JAMES  A.  FARRELL,  PRESIDENT  OF  THE  U.  S.  STEEL  CORPORATION  ' 

Mr  HiAii,.  But   is  vour  idea   that  competition  is  destructive 

M       ■;   km":      tJ"""^'^'"'-^'^  '^-''  ''  '^  ^'  ''-'  ^hing,  anvway?      ' 

A  r.     AKKM.i..    I  here  IS  no  question  about  it.    If  vou  ai.j.lv  it 

Mr.  IJI  AM.  Unten,osmg).     And  this  old  idea  that  ha!  been  nn- 

xa.hng  in  bu.s.ness  for  so  many  centuries,  that  competition  i.  the  life 

of  trade,  ha-  been  all  a  delusion? 

Are  y.n.  al>o  one  of  the  apostles  of  t!iis  new  cull  that  is  being  de- 
eloped  M,  the  country,  that  the  Government  ought  to  step  in  and 
cgulate  and  h.x  the  maximum  pricv  for  the  pr.Kiucts  of  the  0  c.  r- 

FH.rations?     Do  you  agree  ui,h  .Mr.  (;,arv,  Mr.  Carnegie   and  the 

other  aposihs  of  that  idea,  and  Mr.  Perkins'  ' 

>Ir.  Pakkii.l.  Is  that  a  personal  qut'stion^ 
Mr.  Reed.  He  wants  your  personal  opinion 


560 


IxursTRiAi,  Combinations  and  Trusts 


Mr.  Br.ALi..  I  would  like  to  have  your  personal  opinion  about  it. 

Mr.  Fakrixl.  I  have  wrillcn  it  out.  1  thou^^hl  i)u>^ibly  1  might 
be  asked  the  cjuestion. 

I  do  not  suppose  that  my  ojiinion  on  the  subject  is  of  any  particu- 
lar value.  If  your  prefer 'to  confine  thi-  incjuiry  to  the  indu.-try,  I 
shall  endeavor  to  answer  all  the  (|uestions  you  wish  to  put  to  me, 
but  if  you  want  my  ideas  on  this  sui)ject,  I  shall  be  glad  to  give  them, 
although  I  do  not  con-ider  them  of  value. 

Mr.  Hi  \i.i..  It  i^  an  interesting  ijuestion,  Mr.  Farrell,  and  rather 
a  new  onv. 

Mr.  Fakki  I.I..  I  am  not  a  publicist. 

The  ('11  AiKM AN.  We  are  more  anxious  for  your  opinion  on  that 
account.     [Laughter.j 

SVPERVISION   OF   CORrOR.\n()NS. 

Mr.  F.\RRi.i.i,.  I  belie\-e  that  it  i-  important  for  the  Government 
to  assume  the  i)ower  of  such  supervision  of  corporations  engaged  in 
interstate  traffic  as  will  result  in  full  and  clear  publicity  of  their 
general  operation-,  their  rtct'ipts  ard  evpinditure-  and  protits  and 
losses,  in  order  to  protect  investors  and  the  people  generally.  Such 
supervisorv  board  could  not  only  bi'  authorized  to  comjal  such 
necessary  publicity,  but  emitowered  in  the  ca-e  of  any  coq)oration 
not  presenting  information  as  to  thi'  details  re((uired  by  the  law  which 
may  be  enacted,  to  inNc-tigate  into  the  conduct  of  its  business,  with 
a  \iiw  to  full  expo'-ition  of  its  methods.  Such  publicit_\  as  I  have 
in  mind  is  along  the  lines  of  the  information  that  ha>  been  freelv 
and  fully  given  out  by  the  United  Staler  Steel  CorpoiMtion  in  its 
annual  reports  and  fre(|U(rit  statement-. 

The  ti.xing  of  i^rices  by  Ciovi  rnment  authority:  Speaking  entirely 
as  an  individual  and  giving  my  per-onal  views  without  any  knowl- 
edge of  what  might  bi'  the  \  ii w^  of  other  olTicials  and  directors  of 
the  l'nit((i  States  Steel  Cor])oration,  it  would  a|)j)ear  to  be  abso- 
lutelv  impracticable  for  the  (iovernment  to  attem:  '  to  li\  prices  ol 
all  commodities,  even  thoM'  manufactared  only  by  the  -teil  indu.stry, 
in  view  of  the  hundred-  of  thou-aixb  of  \ariations  of  shajH-s,  sizes, 
section-,  gauges,  kinds,  ((ualitie--.  etc.  When  it  i-  considered  that 
it  re(|uiresa  large  corps  of  experts  in  each  of  the  manufacturing  com- 
panies of  the  riiited  St.ites  Steel  Cor|ioration  alone  to  determine  tin 
costs  of  hun(lred>  of  thousand^  of  articles  or  variations  of  such  {)rod 
ucts  as  those  companie-  mak(\  it  can  be  readily  under-tood  that 
it  would  rc(|uire  hundred-  of  expert-  merely  to  di  ti  rmine  suitablr 


(■(I 


Methods  of  Dealing  with  the  Trust  Problem    561 

prices  for  the  steci  industr>'  alone,  without  considerini,'  the  thnusind. 

nt  o  her  industries jn  the  United  States,  each  of  which  uo  I     £ 

Mua  ly  entitled  to  have  prices  fixed  on  their  multitude  of  pn;  uc  " 

It  the  questions  be  considered  from  the  standrn,inl  ui  fix  ny  maxi- 

u^t  cited,  a>   veil  as  the  difficulty  of  satisfying  the  many  manufac- 
urers  engaged  in  the  same  lines  of  trade,  each  of  whom  iK^dil 
erent  cost^  .,f  manufacture  to  prodi;, v  the  ^ame  or  similar  articles 
would  seem  unnecessary  to  point  out  the  many  other  objection.' 
UKluding  the  necessity  of  frequently  altering  the  fixed  prices  t.', 
accord  with  the  laws  of  supply  and  .lemand.  the  changeable  c!t< 
manufacture  contingent  on   the  volume  of  production  and  other 
exigencies  ol  manufacture.    As  a  natural  coroUarv  to  the  fixing  of 
either  changeable  or  maximum  {)rices  would  be  the  inevitable  ne- 
(e>Hty  ot  fixing  maximum  and  minimum  wages  to  labor    as  it  i-, 
necessary,  according  to  theorists  and  economists,  that  the  wages  of 
labor  must  be  commensurate  with  the  article  which  it  manufactures 
or  which  :t  directly  or  indirectly  consumes. 

Suggested  method  of  insuring  fair  prices:  If  it  should  be  a^ked 
however,  granting  the  necessity  of  (lovernment  supervision  of  corpo- 
ations  under  Feder.d  incorporation,  whether  mandatory  or  volJin- 
lary,  as  in  the  wisdom  of  Congress  might  be  determined,  and  conced- 
ing the  impracticability  of  fixing  prices,  how  a  fair  price  to  consumers 
and  manufacturers  alike  may  be  injured  with  the  object  of  avoiding 
Ui)  the  exacting  ol  excessixe  ,,rices  fr.)m  consumers;  (b)  any  possible 
oppression  ot  their  competitors  by  manufacturers  with  larger  cai.ifd 
or  better_ facilities  for  economic  pro<luction;  (r)  ax<,iding  destructiNe 
comi)etition  whereby  weaker  producers  would  be  dris    n  out  of  busi- 
ness; W)  the  impoverishment  of  people  dependent  on  such  industries 
loss  ol  employnunt,  or  reduction  of  wages— it  i^    wt'iiested  rs  beinJ 
worthy  ot  consideration,  a  law  similar  to  that   uhich  obtains  i,, 
(  anada-\-..u  are  no  doubt  familiar  with  that  lau  in  Canada      ,n.i 
whi(  h  111  elTi'ct  is  the  [)raetice  in  Cermany. 

\\hen  it  might  api)ear  to  the  Covernment  bnani  ,.f  smHTvisJon 
nther  on  their  own  initiative,  or  fnmi  the  complaint  of  any  consid- 
.ral.le  hodv  of  consumer-,  that  prices  in  any  line  of  industr\-  are 
unreasonably  high,  they  s|,„„i(i  be  empow.Ted  to  make  inquiry  into 
the  tacts,  to  call  upon  manufacturers  to  .ijselose  their  profits.  an,i  t„ 
<lctermine  and  indicate  to  manufacturers  their  opinion  ;is  to  the  re  i- 
sunahleness  ..f  th.ir  price,  subject,  if  nccessar;-.  to  review  by  the 
courts  us  to  any  contention  that  i)rices  were  confiscatory 


562 


Industrial  Combinaiions  and    I'kusts 


Likewise,  when  in  the  opinion  of  any  })ody  of  manufacturers,  it 
should  appear  necessary,  in  order  to  prevent  destructive  com[)eti- 
tion,  the  lowering  of  waj^e.-.  the  impairment  of  plants,  throwing  work- 
men out  of  employment,  and  other  similar  evils  through  reduclicjn 
of  prices  to  levil-  which  would  not  permit  efTicient  plants  to  operate 
at  a  fair  i)rot"it.  it  should  be  permissible  for  manufacturers  or  the 
owners  of  jilants  to  enter  into  agreement  as  to  such  reasonable  prices 
as  might  be  necessary  to  prevent  such  results.  To  avoid  the  pos- 
sibility iif  -uch  munufacti  njiv  agreeing  on  excessive  prices  there 
would' be  the  remedy  oi  the  opportunity  of  apjieal  by  consumers  to 
tlie  Government  board  of  >upir\  i-ion,  and  the  consequent  pubHcity, 
which  would  act  as  a  rotraiiU  upon  manufacturers  from  tixing  ex- 
cessive price'^;  jtenaltii's,  <uch  as  forfeiture  of  Federal  incorjMJration 
Mr  other  suitable  mean>  (jf  redre-s  could  be  enforced,  if  necessary, 
to  dissuade  manufacturi  r-  fnin  maintaining  prices  adjudged  to  Ix; 
I'ither  excessive  or  ruir  m^l}'  low. 

The  foregoing  sugge-t  ,n  i>  not  by  any  means  a  novel  or  original 
one.  It  is  in  effect  that  which  is  piermitted  in  Canada,  Clermany, 
and  other  foreign  count ri'  ^,  the  object  of  who.se  Governments  is  ap- 
parentlv  to  fo>ter  indu.-trie>  rather  than  to  tear  thtni  down.  Such 
Government^  not  onlv  allow  reasonable  prici"^  to  be  li\ed  by  agree- 
ment, but  refjuire  them  to  be  li\ed  for  the  i)rolectinn  of  manufac- 
turers, consumer^,  and  labor  alike. 

Mr.  Bi;ai.l.  .\s  i  understand,  your  po.-ition  i-  that  it  is  not  pos- 
sible for  the  (Jovennnent  to  step  in  and  go  to  the  extent  of  lixing 
even  a  maximum  price,  for  the  reaM)n  that  you  have  so  clearly  stated.-' 

.\Ir.  l'\KKi  I.I..  Would  you  accept  that  brief  as  an  answer  to  your 
(jue>lion,  Mr.  Heall? 

Mr.   Hi:\i.i..  ^'es. 

Then  the  alt<rnati\i'  would  be  the  breaking  down  of  the  laws  as 
they  exi>t  to-day  that  forbid  the  kind  of  agreements  such  as  you 
have  mentii)ned.  \'ou  would  have  to  rejjeal  all  the  laws  forbidding 
monopoly  and  restraint  of  trade— the  .Sherm.m  .\ct  and  everything 
like  that? 

Mr.  1".\kki;ll.  Not  nccessaril\.  i  do  not  believe  in  the  repeal  of 
the  Sherman  ;\et,  but  I  believe  the  Sherm.ui  .\ct  >houl(l  lie  amended 
so  a.■^  to  enable  manufacturer.^  to  know  uhat  they  can  do.  We  do  not 
know  now  what  we  can  do, 

Mr.  BlAt  I .  If  thi'^  theory  that  was  suggested  here  first  by  Judge 
Gary  should  be  put  in  operation,  and  '^ome  governmental  agency 
should  be  nijuired  to  ii\  ,1  ma\irnum  pri(r  ,1-  a  ba-is  for  it>  action, 


Mktiicos  ,,f  Dr:ALix<;  with   nu.  Trist  Problem 


'1  a-  to  the 


t.'?;..';  that  lia:'^:  ■:s;;;!^"^  "^  ^'" '''''  ^^^'-'  "•  ^^e 
^;^^^:^^^^^^^^^ 

1  .>h.r  or  r,ot  n  unuK;  h.  ru.c...ar>-  f„r  that  a.mmi.s.- m '    r.  h     .' 

^   r  )  ou  m„hl  t.r,n  ,t.  t„  hav.  accuratr.  full,  an.l  c.mplH  ■  nh^m. 

t-n  a.s  to  th.  c„.t  o.  any  and  every  article  the  price   )f  ul  ic      h  v 

uould  attempt  to  rcj^elate;  and  that  con<lition  woukl  hrin-'    lu    the 

UTy  condmon  a^a.nst  which  you  protect  to-dav:  it  w.  u  d  uX^M 

pr^!n;it  ,;;::;:;:;;i;^  """^^^^^'"" ''-  '^'^■"^'^'" '--  '^  -^  •'-'«-"  "> 

-Mr.  Ht:\i.i,.   ^■^^, 

i'  -t',  T'     '  "H.vitaMy  result  from  destructive  competition 

'        h     'i,""h     T,"'"'"'''''''^:'"'  •"■  ''"^'"^■^^'  '■'  -^h""'-'  '"•'•'luallv 

t    nri    .     ,    /'     m''''";?  r^  agreements  amon«  manufacturers 

.1^  to  prucs  as  \voul(   enable  (he.n  to  -.void  the  dcsU-uctive  comr.eti- 

lion  which  IS  mijihedly  prohibited.  u)nii)tti- 


EXHIBIT   ,S 

Gi:(jRf;i:  w.  pi  rkivs  ' 

II  seems  to  me  thai  the  developmrnis  of  .hi<  la^t  year  have  made 

h.  pretty  ^a.n  to  our  ,.,,,1.    :„,,  ..y  observation  is  that  t^-^^ 

N  npe  to  n  ake  a  earetui  be^mnu,^-  at  least  of  some  sort  of  regulation 

«;     nhT.,a  e  and  ,n,erna.,o„al  business,  and  having  watched     hi" 

■-;;'•'-  'i--l''!-;n,  a.  carelully  as  I  haNe  been  able  to.  and 

s  H.,k  .,n  ,t.  I  I  ave  reduc,.,!  to  a  ^h.  rt  memorandum  wha    occurs  to 
me  miuht  po.Hbly  b.  ,  M-p  that  culd  be  taken  verv  pn.mptl     f 
rHuf.     I  will  n.ad  ,t.     I  ha^e  divided  thi.  into  two  pa'rts.  ..  Lll,,,,.: 

.a...  in  h..crs,au.  c-.,n.„ercc.  ...n.i  v.n,.  :!:;'^r:;j:':::':  ::',i:;-:z 


5^4 


Industrial  Combinations  and  Trusts 


IMMEDIATE   RELIEF. 

First.  Create  at  once  in  the  Departn^nt  of  Commerce  and  Labor 
a  business  court  or  conlrollin;:;  ctj  amission,  composed  larj^ely  of  expe- 
rienced business  men. 

Second.  Give  this  bndy  lunver  to  license  corp(jrations  doinj;  an 
interstate  or  international  iju-ine.-s. 

Third.  Make  such  license  depend  on  the  at)ility  of  a  corporation 
to  comply  with  conditions  laid  down  by  Congress  when  creating 
such  commission  and  with  such  regulations  as  may  be  prescribed 
by  the  commission  itself. 

'Fourth.  Make  publicity,  both  before  and  after  license  is  issued, 
the  essential  feature  of  these  rules  and  regulations.  Require  each 
company  to  secure  the  aiiproval  of  said  commission  of  all  its  affairs, 
from  its  caiiitali/.ation  to  its  business  practices.  In  the  beginning 
lay  down  only  broad  principles,  with  a  \iew  to  elaborating  anil  per- 
fecting them  as  conditions  refjuire. 

Fifth.  Make  the  violation  of  such  rules  and  regulations  puni.sh- 
able  by  the  imprisonment  of  individuals  rather  than  by  the  revoca- 
tion of  the  license  of  the  company,  adopting  in  this  respect  the  method 
of  procedure  against  national  banks  in  case  of  wrongdoing. 

PKO-prrTlVE    KI  l.!FF. 

First.  The  House  and  Senate  to  join  at  once  in  appointing  a  com- 
mission to  make  a  careful  study  of  the  Sherman  law  and  the  various 
suggestions  that  have  been  made  regarding  its  repeal,  amendment, 
and  amplil'ication. 

Second.  Said  commission  to  >tudy  and  report  on  the  wisdom  and 
practicability  of  a  national  incor[)oration  act. 

SUMMARY. 

.\nyone  t'amiliar  with  present  business  conditions  in  this  countrj', 
both  as  to  domestic  and  foreign  trade,  realizes  that  the  brakes  are  on. 
We  are  not  expanding  our  domestic  trade  to  the  extent  we  should  be. 
New  enterprises  are  not  being  undertaken  as  freely  as  they  should  be. 
Capital  in  this  country  is  contracting  rather  than  expanding  its  op- 
erations, while  Germany,  Canada,  and  other  countries  are  forging 
ahead  with  their  industrial  plans.  The  rea.son  for  this  attitude  on 
our  part  arises  largily  from  the  fiar  engendered  by  the  prosecutions 
undi  r  the  Sherman  .\ct.  .\t  the  i)resent  tin.v  the  business  man's 
Comj)laint  is  that  he  doe-  not  know  when  he  is  right  or  when  he  is 


Methods  oi   In.xusG  with  thk  Trust  Proih.em     5O5 

wrong;  that  this  apparently  can  not  he  known  until  he  is  prosecuted 
and  his  case  reaches  the  court,  and  that  a>  matters  now  stand  he  does 
no  and  can  not  know,  as  he  proceeds  with  his  business,  whether  he 
is  a  good  citizen  or  a  criminal. 

Serious  as  this  phase  of  the  situation  is,  it  is  all  important  that  we 

do  not  commit  ourselves  to  a  permanent  national  policy  un  il  such 

■emrjiitment  can  he  made  in  a  calm,  dispas.ionat.  frame  of  mind  the 

peopio  hax.ng  had  ample  opi,ortunity  to  weigh  the  pros  and  cons  of 

V     r  r  ■'■  ^^"  "  ^™''-  '"^mediate  relief  is  clearly  desirable   if 

such  relief  can  he  provided  along  conser^•ative  lines 

thpftr.""'-  ^""^'^/.'"^^^^^T  ^'"'"^  corporations,  which  in  itself  is 
the  1  r.t  step  in  establishing  the  principle  of  publicity  between  cor- 
porations and  government.     It  ought  not  to  be  un\\ise  or  dilTicult 
therefore,  to  immediately  expand  the  powers  of  the  Department  of 

ienirr  '"1  ^''r""'  rh  '■^■-^"^  ^^'  I'^'^^^^y  -"^  control.  sutB 
ucntlj  to  create  a  board  of  control  with  power  to  license  such  in- 
terstate companies  as,  in  the  judgment  of  such  hoard,  are  clearly 
working  for  and  not  against  public  interest.  In  other  words,  in  .uch 
cases  substitute  a  hoard  of  this  sort  for  long-dra^vn-out  lawsuits. 
I  his  would  have  the  immediate  efTect  of  placing  any  company  able 
to  secure  such  a  license  in  position  where  it  would  know  that  it  was 
F>roceeding  along  lines  n<.t  in  violation  of  national  laws  or  Federal 
"^r.i  %  ,^"'"^,^''"^^'^"^  ^s  could  not  <^r  did  not  wish  to  meet  this 
test  \\ould  then  have  no  right  to  complain  if  they  were  proceeded 
against  under  the  Sherman  law.  prucceuca 

_  In  the  above-described  manner  immediate  relief  could  be  nro- 
hw  .;  '  .  '  'T'  ''"""  ^^'  questions  surrounding  the  Sherman 
law  anc,  national  incorporation  for  interstate  in.lustrial  companies 
would  be  under  an  invstigation  that  would  be  proceeding  in  a 
calm  and  orderly  manner,  with  a  view  to  reaching  ultimately  a 
permanent  solution  of  the  whole  question.  Meanwhile,  uncer- 
tainty wouK.  he  dispelled;  yet  we  would  only  be  building  up  our 
pr.'sent  Department  of  Commerce  and  Labor  and  Bureau  of  Cor- 
porati.,ns  mto  a  live,  vital  bureau-much  in  the  .^ame  way  that 
we  gradually  built  uy.  the  Interstate  Commerce  Commission  by 
extending  and  enlarging  its  powers  from  time  to  time 


II 


Senator   vVatson.  You  spoke  of  the  best  efficiency  being  the 
est  of  success.     Do  you  tl  ink  that  under  the  present  law-s  the 
best  efliaency  can  be  reached? 


;66 


IxDrSTRIAl.    (^)Mm\ATI()NS    AND    TRUSTS 


Mr.  Pr.RKiNS.  Xi),  >ir. 

Senat(jr  Watson.  Then,  as  I  understand  your  corr mission  idea, 
you  would  have  this  commis>ion  alliw  the  corporations  to  do 
practically  anythint,'  that  did  not  interfere  with  the  puijlic  interests 
that  the  cor[)oration>  wanted  to  dor' 

Mr.  Pkkkins.  Broadly  spealdni:.  tliat  i^  about  it.  I  tjelieve  that 
for  a  tinie  eonipiele  iiuhHcit}'  of  the  corporation's  atTairs,  through 
a  commission,  would  l)i'  a  sutl'icient  guarantee  of  such  protection, 
and  that  from  that,  as  conditions  in  our  country  and  in  the  world 
develoi)ed,  we  could  add  further  specitic  regulations  to  meet  chang- 
ing conditions. 

Senator  Watson.  Some  of  the  witnesses  have  advocated  uni- 
form prices  practically.    What  is  your  opinion  of  that? 

Mr.  I'KRkiNS.  I  believe  that  is  one  of  the  things  that  could  be 
taken  u[)  by  such  a  commission  and  ])robably  arrived  at  rather 
speedily,  and  1  belie\e  it  would  be  a  \ery  |)roper  thing  to  work  out 
as  fast  as  it  could  be  d'>ne  without  seriously  disturbing  our  domestic 
or  foreign  trade  in  any  given  cor])()ration. 

Senator  WAtsoN.  Would  you  have  that  worked  out  by  the  com- 
mission or  by  statute? 

Mr.  Pi:rkins.  Wai  miu'ht  be  able,  in  that  particular  case,  to 
word  a  statute  th  it  ^vouM  substantially  cover  it,  !)ut  I  do  not  think 
that  we  can  for  a  moment  lose  sight  of  the  fact  that  business  is  very 
ditTerent  from  trans])ortation,  and  that  each  business  has  to  be 
conducted  somewhat  ditTerently  from  its  brother  business,  and  of 
course,  as  a  whole,  it  is  a  very  delicate  network. 

Senator  Watson.  The  theory  worked  out  by  the  Interstate  Com- 
merce Commission  on  freight  rates  is  an  average  rate  conlined  to 
zones,  as  you  understand? 

Mr.  Pkrkins.  N'es.  sir. 

Senator  Wats(jn.  They  do  not  charge  the  same  rate  for  the  same 
service  always? 

Mr.  Pkkkins.  .\'o. 

Senator  W.vtson.  They  charge  what  we  would  call  an  average 
rate,  for  instance.  They  may  have  the  same  commodity  for  .i 
certain  city— three  rates? 

Mr.  PtRKiNS.  Ves. 

Senator  Watson.  As  to  some  commodities  I  can  understantl  why 
a  uniform  jirice  would  work  very  satisfactorily,  but  as  to  others 
I  think  it  would  mean  a  complete  change  in  freight  rate. 

Mr.  Pkkkins.   I'hat  is  exactly  my  point. 


uni- 


ilc 


Methods  of  Dealing  with  the  Tru.,t  Problem     567 

SeiKUur  \Vats(i\.  So  you  might  work  that  out  on  certain  com- 
modities, and  as  to  others  you  would  not  want  the  same  rule? 

Mr.  Perkins.  That  is  exactly  it,  and  that  is  one  reason  why  I 
believe  it  is  goinR  to  he  extremely  important  to  have  ,1  commission 
like  that,  composed  larj^'i'ly  of  business  men  ol"  experience. 

If  I  may  take  your  time  for  a  moment~I  have  thoup;ht  about 
this  for  a  good  many  years— I  believe  that  a  commis.sion  composed 
ol  such  men  would  accomplish  a  good  many  things.     We  ha\e  in 
this  country  no  goal  for  the  bu>ine>s  ,\ian  in  the  way  of  preferment, 
or  honorable  mention,  so  to  sprak.  unless  he  eventually  goes  out 
ol  business  into  public  life.     Xow,   Europe  does  very  dilTerently. 
In  Germany,  for  instance,  a  captain  of  industry  is  knighted  and 
here  he  is  indicted.     I  believe  that  if  we  estalilish  a  business  court 
nl  that  sort  that  it  would  gradually  come  to  be  the  goal  of  the 
young  man  who  is  going  into  business.    They  would  say,  "Some 
day  or  another  I  may  be  called  to  serve  on  this  commissi<in  or  court." 
I   think  it   would  be  a  steadying  intluence  on  that   man's  whole 
business  career,  and  he  would  look  forward  to  it  like  the  lawyer 
'  les  to  the  Supreme  Court  as  possible  jjreferment,  and  that  man 
would  give  up  almost  any  business  calling  finally  to  be  a  member 
of  such  a  commission.     'I'here  is  not  a  lawyer.  I  suj)pose,  in  the 
country  who  would  not  give  up  any  lucrative  practice  for  an  ap- 
pointment on  the  Supreme  Bench,  because  that  has  come  to  be  the 
goal— the  highest  degree  of  honor— and  if  it  is  said  that  it  would  be 
turning  business  over,  or  turning  the  tloverr  'iient  over  to  business, 
I  do  not  think  that  holds,  because  we  hav.    not  found  it  in  any 
aspect,  certainly  not  in  regulation  of  tmr  railroads.    Take  another 
instance.      ()ur    Presidents   select   officials   from   corporation    life, 
like  .Mr.  Kno\  and  Mr.  Wickersham,  and  they  gave  up  lucrative 
businesses  and  went  into  these  otlices,  and  have  stood  an  immense 
amount  of  abuse  from  their  old  friends  and  colleagues  and  associates. 
Vet  they  have  discharged  their  oath  of  office  as  they  saw  it  in  the 
interest  of  the  people.    I  believe  the  business  men  would  adcjpt  the 
same  course.    Mr.  John  Clallin,  of  New  'S'ork,  for  instance,  a  man 
who  had  reached  the  point  of  life  where  he  had  had  broad  experience, 
called  on  such  a  commission  as  that  would  go  on  it  and  give  to 
the  public  the  same  sort  of  service  that  he  had  lieen  giving  to  his 
own  business. 

\  ou  could  have  a  commis-ion  ,,f  that  sort  of  seven  or  nine  men 
who  had  had  that  kind  of  e\perien(\'  and  knew  the  trade  conditions 
of  the  world,  and  would  work  that  way  for  the  [)ublic  interest.     I 


568 


Industrial  Combinations  and  Trusts 


think  vcu  can  ca.ily  imagine  uf  what  cnormou.  value  fhat  would 
be  to  our  penple  in  their  own  alTairs,  and  more  especially  to  Uh  m 
develoi)ing  our  foreign  trade. 

Senator  Brandkc.kk.  1  have  only  a  question  or  two.    The  com- 
mission that  you  would  like  to  .ee  established,  1  believe  you  calle<i 

'^  Mr.''pLRKiNS.'  '■  .\  rose  by  any  other  name"  would  suit  me  just 

'''senator  liK andegek.  To  use  your  own  phraseology.    You  spoke 
of  having  a  t>uslness  court  established  in  the  Department  of  Com- 
merce and   Labor  before  whom  you  could  make  application  for 
Governmer,'  Ucense,  if  1  recall  your  proposition.^ 
Mr.  Pkrkins.  Yes,  sir. 
• 
Senator  Brandegee.  Would  you  allow  an  app-al  from  the  ruling 
of  the  commission  if  it  declined  to  issue  a  license.-' 

Mr    P'  RKINS.  I  think  so.     I  think  the  appeal  sh..uld  go  either 
to  the  Interstate  Commerce  Commission  or  some  court- 
Senator  Brandegee.  You  mean  the  Court  of  Commerce. 
Mr   Pi  KKivs.  The  Court  of  Commerce.  I  mean. 
Senator  Brandegee.  Now,  I  do  not  knew  that  I  thoroughly 
comprehended  what  vou  meant  \o  give  this  business  court  m  the 
wav  of  power.    You  would  give  it  the  power  to  license  applicants 
en<ni"ed  in  commerce  among  the  States  if  they  lound  what? 

Mr    Perkins.  .\t  the  beginning  I  would  give  them  power    o 
license  such  a  company  as  in  the  judgment  of  this  court  was  properly 
capitali/ed-conservativcly  capitalized-and  conducting  its  busi- 
ness along  such  lines  as  to  commend  its  practices  to  the  judgment 
of  Vhis  court,  and  cause  the  court  to  feci  that  it  was  working  in  the 
public  interest   rather  than  against  the  public  interest,  not  re- 
straining trade  undulv  or  ac^iuiring  monopolistic  control,  and  with 
the  understanding  that  this  company  would  submit  its  aflairs  in 
the  most  complete  manner  possible  to  this  court,  .lot  to  be  f^led 
in  the  archives  of  this  court  and  r -garded  as  purely  personal  tn 
the  President  or  the  .Xttorney  General,  but  to  be  in  turn  made 
public  to  not  onlv  the  stockh.^kkr.^  of  this  comiKiny  but  to    he 
public   so  that  competitors  could  know  the  genera!  methods  of  the 
company  and  the  public  could  know  the  methods  of  the  company; 
and  that  is  about  as  far  as  I  would  go  at  the  start. 


Methods  of  Dealing  with  the  Trust  Problem     569 

n'rl  t'n^T''^  "^T*^'"""  'l^"""'"  "J' '"  connection  with  that  regulation 
.nd  control,  much  as  we  have  developed  the  regulations  and  contro" 
0    railroads   we  could  expand  from  year  to  y?ar;  but  I  believ^  so 

hurouRhly  that  publicity  of  the  right  sort  would  be  a  very  strong 
.  e  errent  on  .le  management  of  any  company  from  doing  anything 
tl  at  wa.  not  right,  and  would  be  so  convincing  to  the  public  S 

;  lie    7?  ^^'"y."''  ^^''"«  ^""^'  ''^^''  ^hat  we  would  find  ou  se  ve 
re  le\ed    ron   the  necessity  of  resorting  to  a  long  schedule  of  fixed 

senator  Brandegee.  You  would  put  in  those  things  that  vou 

r^uid  thi'f  "•  '^'  ''''''''  ^^'^^^'"S  ^he  business  court  as  a  r'^le 
to  guide  he  busmess  court  in  determining  the  question  of  whom 
It  .should  license  and  whom  it  should  not? 

Mr.  Perkins.  Yes,  sir. 

Senator  Er.andegee.  Of  course,  that  would  have  to  be  carefully 

Mr'  P^EKKiN^'Yer^n  ""'  ^'  '"  ""-asonable  restraint  of  trade'; 

Senator  Brandegee.  And  on  those  questions  you  would  allow 
thejjght  of  appeal  to  some  court  from  the  judgt^ent  o^the  com 

Mr  Perkins  Yes,  sir.  As  it  is  now,  however,  whatever  mav  he 
said  about  the  interpretation  of  the  Sherman  Ac  by  the  couTthe 
P  am  cold-blooded  fact  remains  that  as  we  stand  to-day  unless 
.hrough  the  steel  suit,  in  two  or  three  years,  or  some  other 'suU  we 

md  some  other  interpretation,  we  have  got  to  apparently  pass 

through  a  long  series  of  lawsuits,  and  each  man  has  got  to  come  up 

and  have  his  corporation  passed  on  by  a  lawsuit  ^ 

Aow,  if  we  could  save  those  two  or  three  years  by  immediately 

reating  a  court  that  could  say  after  a  corporation  has  com  £fo  ^ 
H .  -N ow,  we  will  lake  the  responsibility  of  saying  you  can  go  ahead 
-  l.mg  a.s  you  keep  us  informed  about  what  your  practices  are  "k 
■>vould  help  very,  very  mu-h.  ' 

Senator  Brandegee.  Would  you  have  this  business  court  issue 
these  licenses  tor  a  hmited  period  of  time? 

Mr.  Perkins.  No,  sir;  I  do  not  think  that  is  feasible.  If  the  busi- 
ness was  legitimate  and  properly  started,  and  an  interstate  and  in- 
tcmational  business,  with  stockholders  in  large  numbers  eve  ;- 

iSie  "  ''""'^  ''  ^"""  ^"  ^'■^'  ^''^'" '"^^  «f  permanency 

'  Thus  in  original — Ed. 


570  Industrl\l  Combinations  and  Trusts 

'Senator  Brandixkk.  1  interred  fnjni  your  last  statement  that 
the  license  you  contemplated  would  be  a  revocable  license  wlu  never 
in  the  judgement  ..f  the  business  court  the  cor[)oration  was  not  act- 
in"  to  suit  it?  .  ..,•!.. 

Mr  P1.RKINS.  I  certainly  would  ^nve  the  court  the  right  to  re- 
"oke  the  license  with  the  ri[^ht  of  appeal,  but  1  would  make  that  al- 
most the  last  report;  that  i>.  I  wouKi  in  that  re-pect  control  the  cor- 
porations as  we  do  our  bank>.  I  wouKl  i)uni>h  the  mdividual  an. 
exlnu^t  all  those  channels  before  I  actually  injured  the  existence  of 
the'companv  itself-  becau>e  we  mu^t  remember  that  the  comi-any 
can  not  do  anvthinj^  wron^.  it  is  not  a  live  tiling;  it  is  a  creation  oi 
man  and  there  is  no  u>e  injurin,^  an  innocent  third  party  ami  dis- 
turbing our  t)usiness  b  -ause  seme  man  does  something  that  i^  m>\ 

"^Senator  Brwdia,!:!:.  You  wuuld  not  have  the  license  revocable 
then,  but  you  would  rely  ujion  punidiing  the  individuals  who  in- 
dulge in  any  unfair  practice-:-  ,      ,  ,     i 

Mr  IMCRKINS.  Yes,  sir;  I  think  tne  Government  should  always 
keep  the  right,  as  a  last  report,  to  revoke  the  license,  but  1  think 
that  should  be  the  last  thing  it  should  do,  and  should  be  don.  per 
hips  in  practice  not  at  all,  but  1  linnk  you  might  easily  have  cases 
where  people  would  be  impris.ne.l  for  having  violated  the  laws 
under  which  they  were  operating  .-r  the  laws  as  laid  .l.iv.n  by  tluJ. 
commission.    That  is  just  what  we  .1.)  with  our  bank>. 

Senator  Hr  ^ndkci  1,.  Do  I  understand  y.ui  to  say  that  .m  the 

question  <.f  wheth.T  tlu'  license  shouM  !..■  n  voked  or  ii..t  y.>u  w.nild 

allow  an  app.    1  t.>  M.me  court  on  that  (jUi-tioi..' 

Mr    IM  Rkr  s.  I  would.    These  oinpanies,  you  m-c,  have  come 

not  only  to  be  merch;'nt.>,  but  they  have  come  to  i)e  trustees  for 

investments.     I  think  it  i-  .Atremely  important  that  the  country 

unders'o.xl  that  aii.l  nali/.d  ihit.  _ 

Senat..r  Br  wui.-ri:.  Il  an  applicant  for  a  license  secured  the 

license,  you  then  >.iv  until  it  w.is  revoked  you  would  have  the  ajiph- 

cants  immune  fmrn  prosecution    under   the   Shcrm.m    antitrust 

law? 

Mr  P1.RKINS.  Yes,  sir.  Now,  vcu  see.  Senator,  if  he  said,  "  Well, 
I  do  not  want  this  license,"  or  '"I  can  n.)t  get  a  license."  then  it 
seems  to  me  that  is  cuiuivalent  to  the  Government  having  notice  that 
there  is  something  about  that  concern  that  tmght  to  be  liMiked  into 
under  the  Sherman  law.  and  h.'  w.nil.l  not  have  a  right  to  complain 
if  the  Government  <li  1  i)r.)ceed  again>t  him  becau>e  he  would  have 


MirnioDS  OF  Dealing  with 


nu.    1  KLSr   rkOBLEM 


31 


had  a  way  to  dcmon^tnilf  tu  thu  lourt  that  he  \va>  entitled  to  the 
license. 

.Senator  Bkaxdkgkk.  Any  corporation  indulsrini;  in  commerce 
anions'  the  States  which  had  aijplied  for  a  license  and  been  denied 
the  hceii-e  hy  this  Inisiness  court,  would  be  subject  to  I)ro^ecution 
or  a  bill  bein^'  br(ju;,'ht  against  them  under  tl;e  Sherman  law? 

Mr.   Pkkkins.   Kx.atly. 

Senator  Hk.\NUK(;i:i..  And  all  those  who  had  been  licensed  would 
be  inunune.-' 

Mr.    I'll; KINS.   Ves.    sir. 

Senator  Hr.\.M)i.gi:e.  So  that,  if  the  hu.sincss  court  thou-;lit  that 
a  man  was  a  proper  subject  for  its  license  and  should  ^rant'^it,  even 
il  the  Attorney  General  thouj,'ht  it  was  directly  operatini,'  in  viola- 
non  ol  the  Sherman  law,  he  and  the  department  m  il-e  (iovern- 
iiient  would  be  j)owerle.ss  to  have  the  ciuestion  tested  in  the  circuit 
<>v  the  Su{)reme  Court  of  the  United  States  becau-e  they  held  a 
license  from  this  business  ccjurt,  which  ojierated  as  an  immunity? 

Mr.  I'krki.ns.  I  tliiiik  that  il  thev  wanted  to  interpose  any  objec- 
tion they  ou^ht  to  do  it  before  the  coiiijkuiv  had  its  license.  I 
think  a  comp-  ly.  „nce  having  had  a  license,  Should  be  immune  so 
lon.i,'  a>  It  lived  up  to  the  condition  under  whi.  h  it  obtainni  its 
lIcen^e— th.it  i-.,  wiiile  the  luense  was  bein«  issued  ii  the  Attorney 
General  wanted  to  interpose  an  objection  he  oUL,dit  to  ha\e  the 
rii^'ht   to  lie  hcird. 

Senator  Huvndk.i  i,.   I  was  juM  ^'oini;  to  ask  you,  would  you  not 
lirovide  that  it  >hould  be  the  duty  of  sume  Gi.yer'iiment  othcial  -the 
\tlorney  (ieneral  or  ^.mubody  else— to  appear  in  behalf  of  the 
Ciovernment  at  the  time  the  corporation  '.\,i-  ,ipi)lyinK  for  it>  li- 
cense? 

Mr.  I'l  HKiN..  I  look  upon  thi^  court  a-,  in  behalf  of  the  (Jovern- 

imiit. 

.Sen.itor  IlKWDEGEi;.  So  do  I;  but  you  would  leave  it  a  matter  to 
be  detirinined  by  the  louri  and  the' applicant  without  any  other 
dejKirtnunt  of  the  (Jovernmetit. 

Mr.  I'ekkin.s.  I  sot  no  objection.  For  in.stance,  if  your  course 
was  adopted  of  having  an  independent  court,  of  allowin«  tlie  Bureau 
ol  C()riW)rati.,ns  to  inter. ere  or  interpose  by  the  .Vttorney  (ienerai. 

Senator  liR andkc.ee.  As  I  understand  i't,  i'  would  not  be  your 
view  at  present  to  make  il  mandatory  on  the  .\ttornev  General  or 
the  I)ej)artmcnt  of  Justice  to  ai)pear,  but  you  would  give  them  the 
L'ht  to  ajipear  if  they  so  desired? 


572  Industrial  CoMiiiNATioNS  and  Trusts 

Mr   PiRKiNS.  I  think  1  would      1  had  not  ih-.u^hl  of  thai.    It 
is  a  new  suggestion,  but  1  think  that  might  not  be  an  iniprop.: 

^^S?nator  Brandfgee.  Vou  spoke  in  answering  some  questions 
that  were  asked  you  about  whether  a  concern  c-'^^'-^'I'-JS /S  P^-r 
cent  of  the  business  would  be,  in  your  opinion,  m  res  ramt  of  trade 
^',"^Vt-if  I  recall  the  ciuestion.  or  whether  it  would  be  c.^ntrary  to 
any  provision  of  the  Sherman  law  or  the  antitrust  act.    W  ou  d  it  no  , 
Tyou  not  think,  lie  in  the  nnnds  of  the  people  who  are  contern,.  a  - 
ing  the  acquisition  of  75  P^'"  ^^''"1  ^'f  ^he  business  tha    the  C.mcrn- 
m?nt  miRht  set  up  the  claim  that  ih-  mere  tact  o    the  control  ot 
3  a  i^roportion  of  the  business  was  that  V   tended  to  show  an 
intent  to  monopolize  some  part  of  the  comm     .e  amo:-   he  Sta  es 
and  therefore  be  in  violation  of  the  second  section  <.f  the  law. 
Mr   rt-RKiNS,  Yes;  I  think  that  is  one  of  the  disturbing  cone  i- 
tions  H>day,  and  1  think  in  that  connection  that  sufTic.ent  we.glU 
haTnot  been  given  t<.  this  phase  of  it  at  all.    1  hose  of  us  w ho  Hve 
had  practical  business  experience  in  more  than  one  line  of  buMmss 
e'pedally,  know  that  a  certain  grou,>  of  men  o,  the  right    ype  and 
aliUty  could  come  nearer  restraining  trade  and  monopolizing  tr..(K 
w       40  per  cent,  we  will  siv.  of  a  given  bu.ine^s  than  another  group 
of  mc^  .night  with  75  I-r  cent  of  the  business.    So  that  it  ..  not  .he 
nercentage  that  doe-^it.but  it  isthemen. 

Senator  Bkandk(..  f.  Vou  have  your  own  idea  ol  what  you  mean 
by  the  words  "restraint  of  trade?" 

Mr.  Pfrkins.  Yes,  sir.  .    .  . 

Stnator  Hrandkgkk.  .\s  1  understand  you,  it  is  not  neccssanl> 
what  the  courts  have  decided  or  said  about  re-tramt  ol  trade. 
Mr   I'l  KKlNS.  I  do  not  know  vh.it  they  have  decided. 
Senator  liKANDKGir.  I  understand  you  to  say  that   vou  think 
there  mav  be  ca>es,  an.i  probably  are.  where  a  great  deal  ol  a  certain 
kind  of  cotnpetition  mav  base  been  eliminated  without  trade  haymg 
been  restrained  at  all,  but  on  the  contrary,  trade  having  been  pro- 
nidli  d? 

Mr.  Pi  KKiNs.  lA.utly. 
Senator  IJkandk.i  K.    nrif  is  all. 

Senator  Nfavi.ands.  1  think  the  ground  ha^  been  cover.d  .dr.  .k  > 
bv  .ome  of  the  qu.-tions  that  have  been  asked  recently,  but  I  simply 
w'i^h  to  ask  you.  Mr.  I'.rkins,  regarding  agreements  limiting  p.  oduc- 
tion  and  agreements  between  couiiKUturs  as  to  price.  What  do  you 
think  of  those? 


Mrnnous  of  Deaunx;  nixir  Tin:  Trust  Problem 


573 


Mr  Pkkkins.  I  think  they  arc  V(r\-  'arn;clv  a  question  of  indi- 
\idual  settlemint.  Ditlerent  line^  of  business  vary  so  largely  ac- 
corciinp;  to  locality  and  envi-ronment,  and  all  that  sort  of  thing,  that  I 
think  that  has  got  to  be  worked  out  with  the  greatest  possible  care 

Senator  Nf.wlands.  Would  you  give  such  a  business  court  tlie 
[lower  to  api)rovc  the  agreements  between  comiietitors  as  to  limi- 
tations of  production  with  a  view  to  preventing  ovcmroduc- 
tion? 

Mr.  Pi.KKiNs.  Do  vdu  mean  a  broad  principle  covering  every- 
thing.-' ■' 

Senator  Xiavlands.  Vcs. 

Mr.  Perkins.  No,  sir;  not  at  the  beginning,  I  would  not. 

Senator  Xkwi.ands.  How  about  prices;  would  you  give  them 
the  powiT  to  approve  agreem.ents  as  to  uniform  prices? 

Mr.  Pfrki.n.s.  No,  sir;  not  at  the  beginning.     I  would  let   that 
work  Itself  out  after  we  had  licensed  50  or  500  comjianies  who  would 
agree  absolutely  to  make  their  affairs  public;  if  a  man  is  not  willing 
to  do  that  then  he  ought  not  to  have  a  license,  in  mv  judgment,  and  ' 
if  he  docN  and  will  play  that  way,  I  believe  it  will'allav  a  great  deal 
of  the  diiliculty.    \un  see  these  questions  to  a  great  e.xtent  are  re- 
volving around  ^v^:.t  might  be  known  as  the  wholesale  business. 
Now  we  gentlemen  all  remember  that  in  our  boyhood  days  there 
were  ver>-  few  retail  store?  where  you  could  not  go  in  and  horse 
trade  for  wh;it  you  wanted.     The  price?  were  not  marked  on  the 
g(^>ds,  and  there  were  all  sorts  of  jirices.    Now  wc  nave  moved  along 
in  the  retail  business  to  a  point  where  we  can  go  down  any  street 
to  a  do/.cn  stores,  and  the  prices  arc  all  open.    There  is  not  vcr>- 
much  trading.     Vou  know  what  it  is,  and  a  man  down  the  street, 
next  door,  knows  what  thi-  other  man's  price  is.     If  tha'  had  been 
suggested  to  our  fatht  rs  th-'y  would  have  thrown  up  their  hands  and 
Slid:  "Kver\b(Kiy  knows  all  about  our  p^ice^ ;  wc  can  not  .nake 
anything."    Ikit  we  have  .vorked  that  out  in  the  retail  business.     If 
i>  an  oiMii  book  as  to  what  prices  are,  yet  there  is  comjjetition  and 
thiy  live.     But  in  these  larger  affairs  which,  for  want  of  a  better 
name,  you  'all  wholesale  business,  there  is  still  all  that  secretive  way 
of  doing,  and  if  there  is  anything  that  temls  to  break  the  command- 
ment of  "'I'liou  -halt  not  bear  false  witness  against  thy  neighbor," 
it  is  the  meth(_>d  by  whith  large  contracting  and  bidding  for  con- 
tracts is  done  in  this  countr>',  because  the  whole  system  is  one  of 
deception  from  bcgiiming  to  ( nd.     It  i<  all  built  up  around  the  idea 
'  In  the  origiinl  this  litic  aud  the  line  above  were  transposed. — Ed. 


574 


InDL'STKIAI.    ('oMIilNAIKJNS   AND    TRUSTS 


that  you  must  lead  unolhiT  man  on  to  make  a  lower  bid,  and  then 
lead  somclKidy  else  on,  and  that  is  supiKised  to  he  competition. 

Now,  we  have  ^ot  in  some  way  or  another,  with  the  enormous  de- 
vrlopment  of  our  methods  of  intercommunication,  livinp;  a>  close  as 
we  do  together  in  the  world,  to  get  the  wliole-aler,  the  corporation, 
on  somethinp;  like  a  l)a-i>  that  will  he  analogous  to  the  retail  business 
wliich  is  done  much  more  in  the  open  and  in  a  frank  manner.  You 
have  the  competition  there  just  the  same. 


Exhibit  9 

LOriS   D.    BRANDEIS  ' 

Mr.  Perkins's  arpument  in  fa\(ir  of  the  efficiency  of  monopoly  pro- 
ceeds upon  the  assumption,  in  the  tir^t  place,  and  mainly  upon  the 
assumption,  that  with  incre."  "  .f  size  conns  increase  of  (thcitr.cy. 
If  any  general  proposition  c  .)e  laid  down  on  that  subject,  it 

would,  in  my  o|iinion,  be  tht  ,)pv>  ite.  It  is,  of  course,  true  that  a 
business  unit  may  be  too  small  to  bo  efTicient,  but  it  is  equally  true 
that  a  unit  may  be  too  large  to  be  elTicient.  And  the  circumstances 
attending  business  to-day  are  such  that  the  temptation  is  toward 
the  creation  of  too  large  units  of  efficiency  rather  than  too  small. 
The  tendency  to  create  large  units  i>  gre.it,  not  because  larger  units 
tend  to  greater  etTiciency,  but  because  the  owner  of  a  business  may 
make  a  great  deal  more  money  if  he  increases  the  volume  of  his  busi- 
ness tenfold,  even  if  the  unit  profit  is  in  the  process  reduced  one- 
half.  It  may,  therefore,  be  for  the  interest  of  an  owner  of  a  business 
who  ha-  capital,  or  who  can  obtain  cajiital  al  a  reasonable  o)^^t,  to 
forfeit  elhciency  to  a  certain  degree,  because  the  result  to  him.  in 
profits,  may  be  greater  by  reason  of  the  volume  ( if  t  he  business.  Now, 
not  only  may  that  be  so,  but  in  very  many  cases  it  is  so. 

And  the  rea-on  why  the  increa>ing  the  si/.e  of  a  businos  may  tmd 
to  inetlficiency  is  perfectly  obvious  when  one  stops  to  consider.  Any- 
one who  critically  analyzes  a  busine---  learns  this:  That  success  or 
failure  of  an  enterprise  depends  usually  ujion  one  man;  u|)on  the 
quality  of  one  manV  judgment,  and.  .above  all  things,  his  capacity 
to  He  what  is  needed  and  his  cap  icity  to  direct  others, 

'  HoariiiHs  hcforf  the  Comniitlee  on  Inlcrstato  Commerce  on  the  Conlrol  (if 
f'(irc)oratinns,  lVrs«ins  .nnd  l''irm'i  onKaKC'l  in  Inlor^^tatc  Commrrtc.  fijnd  Cnnp. 
jnd  Sess.  iqii-i()i.',  pp.  1147-115J,  1 157-1 15**.  1161,  i  if)?,  1170-1171,  x  174- 
1176,  117S-117Q,  i:}('.  « 256-1 JS7,  1267-1271,  IJ74-1276. 


then 


Ml  THODS  OF  Dkaung  WITH   iiii:  TkL^vr  Prohij.m     575 

X,,w,  while  urbanization  has  made  it  pos.ihle  fur  ihc  iiulixidual 
!i.^-i  t..  accomi.ii.h  intmitcly  more  than  he  could  before,  aided  as  he 
i>  i)y  new  methods  of  eommunication,  bv  the  stenographer  the  tele- 
phone and  system,  still  there  is  a  limit  t.^  what  one  man  can  no  >  well- 
u>r  judgment  must  be  exercised,  and  in  order  that  judgment  may  be 
exe  ci.ed  wisely   it  must  be  exercised  on  facts  and  on  a  comprehen- 
sjun  ot  the  significance  of  the  relevant  facts.    In  other  word'    jud-- 
nunt  can  be  sound  only  if  the  facts  on  which  it  is  based  are  bofh 
known  and  caMully  weighed.     There  must   be  opportunities  for 
juugmeiu  to  mature.    When,  therefore,  n-ou  inerea'e  your  business 
to  a  very  great  extent,  and  the  multitude  of  problenis'increa-e  with 
IS  growth,  you  will  tmd   in  the  lir>t  place,  that  the  man  at  the  head 
ha.  a  d  num.hing  knowle.lge  of  the  facts  and,  in  the  second  place  a 
dunini^hmg  opportunity  of  exercising  a  careful  judgment  upon  them. 
'  '-Jh^rmorc^and  this  is  one  of  the  most  important  ground,  of  the 
.n.llie.ency  of  large  institution.-there  dc'velops  a  centrifugal  force 
grc^ater    han  the  centripetal  force.    Demoralization  sets  in;  a  condi- 
.nn  of  lessened  ell:  lency  presents  itself.    These  manifestations  are 
tound  in  m,,.t  huge  businesses— in  the  huge  railroad  ^v^tems  a ^  well 
as  in  the  huge  mdustrial  concerns.    These  are  di>a(Kantages  that 
attend  bigness.  " 

Now,  that  mere  -ize  does  not  bring  eniciencv,  does  not  produce 
..uaess,  appears  \ery  c'early  when  you  examine  the  records  of  the 

In  the  first  place,  most  of  the  trusts  whi.  h  did  not  secure  a  domina- 
.on  of  the  ,„du>try-that  is,  the  trusts  that  had  the  qualitv  of  size, 
but  lacked  the  position  of  control  of  the  industry,  lacked  the  abilitv 
to  control  prices-have  either  failed  or  have  shown  no  marked  .uJ- 
cess      Ihe  record  of  the  unsuccessful  trusts  is  doubtless  in  all  v.,ur 
T     h    u"l",  '^^1^'^'^'i^'^V'f  ^l^^-  trusts  which  did  not  secure  control 
va.  che  Uhisky  Trust     It  was  not  successful.    The  plight  of  the 
(  ordage  1  rust  and  of  the  .Malting  Tru^t  was  worse.    Consider  . ,ther 
trusts  mnv  existing  the  Print  Papers  Trust  (the  International  Paper 
Co.);  the  \Vr.tnigT  ajHT  Trust  (the  American  Writing  Paper  Co.); 
he  Lppcr  1  eather  Irust  (the  American  Hide  &  bather  Co.);  th.! 
Lmon  Bag  Trust;  the  Sole  Lc-ather  Tru.t;  those  trusts  and  a  great 
number  of  others  xrhi.h  did  not  attain  a  monoiK^ly  and  were  there- 
orc;  unable  to  lix  prices  have  h.id  but  flight  success  as  c.mi.ared  with 
th.ir  competitor^;.    You  will  find  daily  evidence-  of  tluii  lie k  of  sue- 
cess  in  market  quotations  of  the  common  stock,  where  they  are 

'  Thu.-  in  original. — Ed. 


576 


iNDrSTRIAL    CoilBINATIONS   AND   TrUSTS 


quoted  at  all,  and  the  common  stock  of  some  has  even  fallen  below 
the  horizon  of  a  (}uotation. 

Now  take,  in  the  second  place,  the  trusts  that  have  been  markedly 
successful,  like  the  Standard  Oil  T.uSl,  the  Shoe  Machinery  Trust, 
the  Tobacc.  Trust.  They  have  succeeded  through  their  monopolistic 
position.  They  dominated  the  trade  and  were  able  to  fix  the  prices 
at  which  articles  should  be  sold.  To  this  monopolistic  power,  in 
the  main,  and  not  to  efficiency  in  management,  are  their  great  profits 
to  be  ascribed. 

Leaving  the  realm  of  industry  for  that  of  transportation,  com- 
pare the  failure  of  Mr.  J.  P.  Morgan's  creation— the  International 
Mercantile  Marine—and  the  astonishing  success  of  the  Pullman  Car 
Co.  The  transatlantic  steamship  trade  was  open  to  competition, 
and  could  not,  in  spite  of  its  price  agreements,  fix  rates  at  an  ele\a- 
tion  sufficient  to  be  remunerative.  The  Pullman  Co.,  po.'^.sessing  an 
absolute  monopoly,  has  made  profits  so  large  as  to  be  deemed  uncon- 
scionable. 

In  the  third  place,  take  the  class  of  cases  where  the  tru<t  has  not 
controlled  the  market  alone,  but  exerted  control  onlv  through  virtue 
of  price  agreements  or  understandings,  as  did  the  Sugar  Trust  and 
the  Steel  Trust.  Those  trusts  p.ad  large  dividends,  because  they 
were  able  to  fix  remunerative  prices  for  their  i)roduct.  But  neither 
the  Sugar  Trust  nor  the  Steel  Trust  has  been  able  to  hold  its  own 
against  its  competitors. 

Take  it  in  the  Sugar  Trust.  .At  the  time  of  the  Knight  case,  a 
little  less  than  20  years  ago,  the  Sugar  T  ust  had  iiraeticallv  the 
whole  business  of  the  country— 1  think  the  Supreme  Court  rV[)ort 
shows  something  like  95  per  cent.  The  vompanv's  rejiorts  to  the 
stockholders  of  iqio,  as  I  recall  it,  show  that  the  compaiiv  now  con- 
trols only  42  per  cent  of  the  production  of  the  country. 

The  |irice  agreements  or  uiidcrstanaing-;  between  the  trust  and 
Its  competitors  had  maintaimd  the  p'ice,  but  ihev  could  not  main 
tain  for  the  trust  its  proportion  of  the  business,  the  Sugar  'I",ust's 
profits  were  maintained,  as  you  so  well  know,  ntit  onlv  through  the 
Jirice  agreements,  but  through  methods  that  were  vulgarly  erimlnai  — 
through  false  weighing;  through  stealing  of  city  water:  through 
extensive  railroad  retiating. 

Then  take  the  Steel  Trust— that  is  a  younger  tru:t,  only  half  the 
length  .  .f  life  of  the  Sugar  Tr.ist,  Put  in  the  Steel  1  rust  you  have  a 
Hnular  manifc'^taiion  of  ebbing  prestige.  In  spite  of  all  this  extraor- 
dmary  power  in  the  Stee';  Trust,  the  control  of  raw  material,  the 


St  has  not 
jpih  virtut' 
rrust  and 

ause  th(>y 


M.THOOS   or   DE.UN-C    W,TH   T„.   T.,  .t   P.OO.O, 


/   / 


power-and  the  additit  of  thi  T.n  '^  ''^n'  \^''°"«h  its  money 
spite  of  all  this  the  Steel  Tlt^^^"  ''  ^  ^'""  ^^-'^ 
age  of  the  iron  and  stee  lu^Sesf  oHh";  "  ''''^^'  '"^^^  '"  P^^^^^- 
has  it  been  a  steady  loser  in  tV,  ^''  country.    And  not  only 

to-,  but  despi,  t^  S  tv  ^V"'T"''«'.  "^  ^"^'"^'^^  i"  this  couT 
steel  rails,  throughourthat\i  ini'",';"  w  "''"'"  P"^^"^'  "^^^bly  of 
ing  return  upon  the  canitll  h  1  >^  '''"'  >''''"'  '^''''  ^  ^iminish- 
years  of  the  Irust  ^         "'"'^'^  "'  compared  ^^■;th  the  earlier 

What  does  that  indint^o     r>         v  .    . 

-■-0-.  either  ac.tu  v  or     Jativelv'  to  T)!  ""k '^"''^  "  ''^^'^^"^^  ^ffi- 

Supplement  those  ids  hv-^'  ^V^^""  ^'"'"'^^'^^■ 
the  stite  of  efficiency  rc^cheV  Fffidenc?""  "V'^'^,'"  '^^•'^^"^'^  °^ 
'n  two  ways :  One  is  in  respect  to  rnSv  ^  u  °^^'"f ''y  manifested 
advance  in  the  art  as  to  tt  nullity  o  V  ',"  '^"'  ^^^  ^>''^  ^" 
i^  whether  there  has  been  an  iT  ^  I  P^'xlucts-and  the  other 
<  he  article.  ''"  ^"  "'^^  ^"'^'^ '"  '^'  ^^t  lessening  the  cost  of 

ar^':^afr,n>du:t;'lr'""  "  "^^^'  ^"  ^^^  ^teel  Trust?  There 
•he  AnK.rican',eJ,e  a  :  pSu^rir'V''  ^."'^^'^  ^^^^^^  -  -hS 
'he  <nher  is  fence  uire  The  S^Truit  r'f -f.  °"'  ''  ''''^  "■■'^J 
-f  those  imp<,rtant  articles  of  nroduTtmn  t  V  ^"'''^ '"  -'^^^^^^^  ^'^  ^'o^h 
' '  ''I  --uni.y-not  in  t^Z  Z  'Sty^.  "^'  ^'^  ^^™^"^ 

ratur;!;:S  tlf  Sf^^:;  ^'tJ^I:  ^\  ^-^^^  states  Sted  C^rpo. 
;;;-own  itself  -;S^^ 

'n  a  panic;  Germiny  aS  H  L  um\  °  1'  ,  !  ^'''''  ''^?-  England  was 
r.ductions  in  cost  which  we  h  Tn.  7  '  f"'"'-^^  the  extraordinary 
■f  steel.  '  ^-"'^  "'^^^  '"  Anienca  in  the  production 

-i;e'dS:;rs^r;h:a:i;nl;'"^  '^7;^- '"  ^-^'-^  -"'^>  ^--e 

I'e  similar,  e.vcept  .,  fa  a  th  ^"i  A"""'  '''"'^  '^'^'^"^^"y  ^"""'d 
-arkets  by  a  ta'ritT  Th-  vi^  d  n  S' t ':  '""'""^^^^  ?  ^h"'"  ^ome 
prasp.       ■  '  "'"^  ""^'^'^^t  ^^s  apparcnUy  within  our 

What  is  the  situation  in  1911? 


578 


Industrial  Combinations  and   Tkusts 


'i'he  world's  market  has  grown  immensely  during  the  interveniii'; 
period.  Out  ide  the  home  markets  of  Germany  and  England  there 
is  a  demand  for  more  than  io,ooo,ooc  tons  a  year,  which  is  anvhody's 
trade — that  is,  it  is  open  to  either  England,  Germany,  or  America, 
whoever  can  get  it.  What  has  been  our  course  of  events?  In  the 
la.st  four  years  the  capacity  of  the  United  States  Steel  Corporation 
has  been  utilized,  in  the  main,  to  an  extent  varying  from  55  to  75 
per  cent  of  its  capacity.  During  a  large  {)art  of  these  four  years  the 
United  States  Steel  Corporation  has  had  3  v',  ])er  cent  of  unused 
capacity.  In  spite  of  that  fact  Germany  and  England  have  acrjuired 
mo^t  of  the  increasing  world's  trade.  The  German  trade  in  this  very 
period  in  which  the  steel  corporation  has  been  in  existence  has  in- 
creased 500  per  cent. 

Mr.  Perkins  ha>  s[)oken  of  the  American  ability  which,  if  it  is  given 
fair  opportunity,  will  attain  commercial  results  far  beyond  anything 
that  may  be  expected  of  Germany,  and  y.  t  there  you'tmd  Germany 
c.nd  England  running  away  with  the  world's  trade,  while  the  steel 
corporation  had  idle  one-third  of  its  plants,  representing  millions 
annually  in  interest  and  dcp.eciation  chai  'es. 

In  the  10  years  during  the  steel  corj  oration's  life  our  foreign 
steel  and  iron  tonnage  increased  from  1,154,000  to  1,533,000  tons, 
Gennany's  tonnage  increased  from  S  ,S,ooo  to  4,,S6S,ooo,  and 
the  E'nited  Kingdom's  tonnage  increased  from  3,213,000  to 
4,594,000. 

Now,  what  is  the  explanation?  This  I  submit :  Owing  to  this  Steel 
Trust  consolidation  and  accompanying  condition  our  cost  of  manu- 
facturing steel  has  risen  to  such  a  point  that  we  can  not  conifiete 
successfully  with  those  countries  or  can  compete  only  to  a  limited 
extent.  We  have  been  losing  our  relative  position  in  the  great  mar- 
kets of  the  world.  That  is  a  very  significant  fact,  in  view  of  the 
contention  always  made  that  we  need  big  business  in  order  to  main- 
tain and  improve  our  position  in  the  world  m.irket.  The  figures  show 
that  during  the  last  10  years,  roincider*  ^ith  the  existence  of  the 
Steel  Trust,  we  have  been  losing  our  prestige  in  ihe  world's  steel 
.market,  ancl  at  the  same  time  the  Steel  Trust's  position  in  the  home 
market  has  been  lessened  by  the  inroads  of  its  independent  com- 
jH'titors. 

The  facts  point  to  the  conclusion  that  th  ■  Steel  Tru^t,  in  spite  of 
the  personal  ability  of  its  managers,  is  disclosing  relati\e  ineffi- 
ciency. 


is  Kivt 
iiythin 

icrman 

he  ste 

millior 

Mktiiou 


s  or 


DkaMX.;    UlTll    THI:    T,u  SI    1'kublem 


due 


Mr.  fVrk 


579 


111,^  s 


(d  only  by  the  <,'rt 
setts,  in  Senator  C 


^u^gests  th.u  systems  „f 


r<'lit  >harin"  wil 


ide 

sha 


IS  in  this  re; 


rane 


itpuLh'dy  owned  trusts.    Now 


home  Stat 


be  intro- 
in  -Massachu- 


ring  as  means  of  so\ 


pect  and  can  olTe 


the  Dei 


ing  these  indu 


T  very  different 


e  have  had  ver\-  ch'lTe 


rent 


examples  of  profit 


inison  Maiiufacturin<>-  C 


trial  pn.hk'ms.    Only  recently 


tries,  was  capita  mT^-^n'  ""'  i  ""'-'""^^  successful  indu;. 
SptTcent.  iu  h ci  le,  of.V  '  •  "'"''  ^V'''^  '''''^  ^'"litled  to 
is'thi.:  K^e^  c  ,  r  h  ;;,  ;;X7l'?"''  '"''"^^^'^''  ^^^"'^  ^^aring 
di^•idends  upon  the  r.  err'  ?!  ^'^^^  .^""H;''^^^"""  in  excess  of  the 
some,,f  thcie  Vl.  <  ^wirk  ,n,l'-  '\'f '''"^-'  ^'"-"^  those  (or 
posed  contribution  <  J/he'u^  ^^JI;^,  t::''^'Th:T- ^^'^  ^""- 
are  applied  in  the  exact  proportion  uuh'U.  Sd  '  T^'/i"" -^ 
son  i(K;i  (it  Droit -hirin.r  ;</,>, t;,     .1     '"   .■  "';'"^s  paid.    IheDenni- 

i'  seems  to'n  c  htJ  '  x  HI  'rd^'  Tf  '  f'''^  '^''^'^  ^^'"^1  - 
Ki^•e  to  those  wh  ,  d  ^  -^[t^ul^'^^V'  7.''"'^  r''"^'''  "■'"^"  ^" 
their  fixed  .salaries  and  w-  Js  Th  i ,  •  "  ^""""^  '"  ^"'^''^'*'"  »'> 
roncern  as  a>mparec]w  htthi^   ^   u  s"t"'T'r  ''^' ^^  '■>lat.vely  small 

What  have  these  trust.s  done  for  the  consumer'    T'nfl  .>,    r 
mi-ioncrol  Comorition^m-,r),  h;^      '^  >-onsumcr.     Lntil  the  Corn- 
Oil  Trust  and  tr?r"cco  frt^  :        ""''''  '"^-^'^'igations  into  the 


;-;!  of  prices  a„a  proiui'ii^hVrk;  p;s:;rr;'"  ,r '■''■ 

b.cc„hasgr„,v„,arg„,Kc..ar.rut;;'o:'C';L;:;:''?„"l- 


-6o  Industrial  Combinations  and  Trusts 

the  average  price  of  book  paper  in  one  of  the  larRe  mills  was  a  trifle 
er  7  cents  a  pound-7.00  cents  a  pound.  Horn  that  date  untd 
1910  he  price  li  book  paper  has  been  almost  ccnistantly  dechnmR. 
in  spite  of  the  increased  cost  of  raw  material,  and  m  spite  of  the  in- 
creased wages.  As  I  said,  in  iSSq  it  >vas  7.06  cents.  In  1890,  that 
one  vear  the  boom  came  in,  and  the  price  rose  to  7.1  cents.  In  iSgi 
it  took  its  natural  course  under  competition  and  was  down  to  6^8 
cents.    In  iSq2,  although  that  was  a  period  of  expansion  in  industr> , 

t  was  down  t'o  6.5  cents.  In  1S93  it  was  6.3  cents.  Then  it  drcwed 
into  the  5  cents.    By  1907  it  got  into  the  fours.    And  later  it  got  into 

the  threes.    And  the  average  price  in  1910,  as  I  have  here,  was  3.99 

""  During  that^imc  t'he  cost  of  manufacture  in  this  highly  competitive 
indu.trv  was,  of  course,  also  diminishing,  but  not  as  rapidly,  or  not 
nearlv  as  rapidlv,  as  the  selling  price,  because  competitive  conditions 
were -constantly  reducing  the  ratio  of  protit  upon  tha    selling    rice 
And  whereas  the  protit  started  at  about  20  per  cent  on  the  co>t   it  got 
down  in  ic  years'to  13  per  cent  on  cost,  and  at  ^^^^l^^^^l^;^^^^^ 
vear^  it  got  down  to  7  per  cent  on  cost.    \  ou  have  there  the  most  per 
ect  illustration  of  what  competition  does  in  compelling  the  <)jvner  of 
an  indu^trv  to  find  some  wav  of  reducing  cost^  a-  a  condition  of  In  ing. 
Now  1  will  show  vou  whit  that  way  was.    It  was  not  by  pursuing 
the  wav  of  the  steel  corporati(ms,  of  increa^ng  the  hours  of  labor,  or 
decreSng  wages.     It  was  jusi  the  opposite.     Senator  Crane  will 
femembe?  tha?  in  this  very\.eriod  which  those  tigures  ccnxr  the^ 
came  a  beneficent  change  in  the  conduct  of  this  ^"^;;f  ^^  (^^'^k:^.  U. 
the  '^tcel  industrv.  and  perhaps  to  a  greater  extent  than  the  steel 
industry)  requires  a  continuous  process;  that  is   paper  making  is  a 
24  hour  proce^s  in  many  of  its  departments     len  years  ag<.  anc. 
before  these  mills  were  running  their  tour  workers  ^y^^'^^"^^ 
Labor  unions  started  the  agitation  for  an  S-hour  da>.     lhi>  was 
one  of  the  industries  where,  in  the  main,  there  could  ^e  no  comprom^ 
on  a  lo-hour  dav.  because  these  paper  machines  and  the  '^'flcntal 
machines  had  to'run  continuously  24  hours  a  day.  b  days  in  the  week. 
The    0-hour  compromise  was  impossible     It  was  either  S  hours^ 
as  the  men  demanded,  or  12  hours.     The  reduction  of  NNorking 
time  to  S  hours  was  made,  not  only  in  mills  where  the  um-m  nnin  - 
felted  itself,  but  in  other  mills  where  there  was  no  union  labor  what- 
soever.    For  the  unions  had.  in  thi^  respect,  ^s  m  many  other 
respects,  created  a  standard  to  which  the  industry  had  to  accommo- 
da  e  itself.    The  manufacturers,  therefore,  in  this  period  reduced  the 


Methods  of  Dealing  with  the  Trcst  Problem    581 

working  time  of  their  labor,  while  their  price  of  by-product  was 
steadily  going  down,  and  their  own  percentage  of  profit  was  steadiK- 
going  down,  and  while  the  cost  of  raw  material  was  steadily  goin? 
up.  Hours  of  labor  in  all  those  departments  were  reduced  u\ 
per  cent-from  12  hours  to  8  hours.  And  yet  while  the  employers 
made  that  reduction,  instead  of  reducing  wages  proportionately 
the  wages  increased.  ^' 

Take  the  wages  in  iqoo.    The  wages  of  these  machine  tenders  for 
12  hours  were  62.4.5;  m  1910  to  iqii  the  wages  for  8  hours  were 
fe-'.7i-    In  other  words,  if  the  hourly  rate  of  wages  be  considered 
you  have  an  increase  there  of  wages  of  about  the  equiyalent  of  btl 
per  cent. 


These  are  some  of  the  reasons  why.  in  my  opinion,  tliis  com- 
mittee should  address  itself  to  perfecting  the  Sherman  law,  in  the 
light  of  the  experience  of  the  past  21  years.  We  have  learned  much 
about  trusts  and  their  ways  in  these  21  years,  and  this  knowledge 
the  La  Toilette  bill  undertakes  to  use.  There  has  been  a  lot  of  filk 
about  the  uncertainty  of  the  Sherman  law,  and  of  the  doubt  felt 
as  to  what  is  reasonable  and  what  unrea.sonable  restraint  The 
dithculty  in  finding  out  what  is  prohibited  is,  eyen  now,  far  less 
than  has  been  suggested. 


Senator  Ctjmmins.  Do  not  confine  yourself  to  categorical  answers 
but  gne  us  your  yiews  upon  the  subject  that  may  be  contained  in 
the  que-tion. 

Mr.  Brandeis.  I  thank  you.     I  have  had  no  belief  that  up  to 
the  present  time  a  question  had  arisen  in  regard  to  any  con)oration 
in  that  narrow  form  in  which  you  put  it;  that  is.  eacii  one  of  the 
large  corporations  I  have  hatl  to  deal  with  have  been  objectionable 
on  grounds  other  than  size  merely.    1  have  con.sidered  and  do  con- 
sider that  the  proi)osition  that  mere  bigness  can  not  be  an  offense 
against  society  is  false,  because  I  believe  that  our  society,  which 
rests   upon   democracy,   can   not   endure   under  such   coiiditions 
Something  api>roaching  er]ua!ity  is  essential.     Vou  may  have  an 
organization  in  the  community  which  is  so  powerful  that  in  a  par- 
ticular branch  of  the  trade  it  may  dominate  by  mere  size,    .\lthough 
Its  individual  practice.-^  may  be  according  to  rules,  it  may  be,  never- 
theless, a  menace  to  the  community;  and  I  mav  add  further  that. 


5S2 


Industrial  C  oMiiixATioNs  and  Trusts 


in  my  opinion,  it  was  bad  Iugi-lati(jn  which  rfmovcd  all  limit-  to 
llic  size  of  curi)oratiuns,  us  \vc  did  from  lo  to  :o  vcars  a-'o. 


Senator  Cvmmins.  r'acistly;  I  wa-  ju>t  coming  to  that.  Health- 
ful and  reasonable  and  effective  competition  is  hardly  to  be  looked 
for  so  lon^  as  there  is  a  community  of  interest  in  so-ca'Ued  competing 
corjjorations,  I  suppose. 

Mr.  Brandkis.  I  so  believe. 

Senator  CiMMiNS.  That  .'^eems  to  be  a  deduction  from  what  we 
know  of  human  nature,  and  therefore  if  we  could  provide  that  these 
great  concerns  should  not  have  common  -tin  kholders  we  would  make 
a  very  considerable  advance  toward  reasonable  competition,  I  as- 
sume. 

Mr.  Br.wdkis.  I  think  m),  but  I  think  that  the  f|uestion  of  the 
limitation  of  the  si/.e  of  the  corporaticm,  if  we  had  an  elTective  law 
reu;ulatinK  trusts,  would  not  become  an  uri^'ent  question  verj'  soon, 
although  it  may  be  a  simple  way  of  :irriving  at  the  result.  To  express 
a  little  more  clearly  what  I  nuan,  I  will  say  this:  I  believe  that  the 
existing  tru>ts  have  aciiuired  the  position  which  they  hold  largel\- 
through  methods  which  are  in  and  of  themselves  re]')rehen,sil-ie.  'l 
mean  either  through  methods  which  are  abuses  of  comjjetition  or  bv 
such  methods  as  were  pursued  Ijy  the  steel  corporation  in  pacing 
ridiculous  x-alues  for  property  for  the  ])urpose  of  monopolistic  control. 

I  am  so  lii.uiy  •\inced  that  the  large  unit  is  no  efficient — I 
mean  the  very  large  unit— is  not  as  efficient  as  the  smauer  unit,  that 
I  believe  if  it  were  jjossible  to-day  to  make  the  coqjorations  act  in 
accordance  with  what  doubtless  all  of  us  would  agree  should  be  the 
rules  of  trade  no  huge  corporation  would  be  created,  or,  if  created, 
would  be  successful.  I  do  not  mean  bv  that  to  say  that  it  is  not 
good  to  have  the  limitation  in  the  law.  What  I  mean  is  that  I  am  so 
convinced  of  the  economic  fallacy  in  the  huge  unit  that  if  we  make 
com[)etition  possible,  if  we  create  conditions  where  there  could  be 
reasonable  competition,  that  these  monsters  would  fall  to  the  ground, 
that  I  do  not  consider  the  need  of  such  a  limitation  urgent. 

Senator  Cummins.  By  that  you  mean,  1  take  it,  at  least  partially, 
that  if  we  had  some  regulation  which  would  insure  honest  capitaliza- 
tion—that is,  bonds  and  stocks,  that  measure  of  actual  value  of  the 
property  taken  in  liy  the  corporation— there  would  be  a  trreatly  less 
motive  for  bringing  them  together? 

Mr.  Brandeis.  I  mean  that;  but  I  mean  something  more,  and  it  is 


lo 


Mr.TiioDs  OF  Dealing  with  the  TRr>T  Pr 


DBLEM 


;S: 


this.  v,o  hack  and  see  -.vhat  the  real  conmandinR  cause  was  of  the  for- 
n  atu.n  of  thc.e  trusts.  In  the  tust  place,  I  do  not  believe  the  desire 
lor  greater  efficiency  was  an  important  moving  cau>e.  The  n(;tent 
rauses  were  two  things-one  was  to  avoid  what  th,,se  interested 
deenu.d  destructive  or  at  least,  ver>- annoying  competition;  theother 

,nl  VV  ^'"'''^'  ''^'•"•''  '''"'''  ''^'  ^he  desire  of  promoters  and 
iMnkers  for  huge  commissions.  The  amount  of  Steel  Trust  renre- 
senting  hankers  _^commissions  was  figured  by  ihe  Commissioner  of 
«-orporations  as  i)i5o,ooo,ooo  in  securities. 


Senator  Xr.wLAXDs.  Mr.  Brandeis,  what  limit  would  you  place 
upon  the  size  ot  corporations?  ^       ' 

Mr.  Br.vndf.is.  I  .hould  not  think  that  we  are  in  a  position  to-dav 
to  hx  a  limit,  Slated  in  millions  of  dollars,  hut  I  think  we  are  in  a 
position,  after  the  experience  of  the  last  20  years,  to  state  two  things : 
In  the  tir.st  place,  that  a  corporation  may  well  be  too  large  to  be  the 
most  efficient  instrument  of  production  and  of  distribution,  and 
in  the  second  place,  whether  it  has  exceeded  the  point  of  greatest 
economic  efficiency  or  not.  it  may  be  too  large  to  be  tolerated  among 
the  people  who  desire  to  be  free.     I  think,  therefore,  that  the 
re>   ..^mition  ot  those  propositions  should  underlie  any  administra- 
tion ot  the  law.     As  I  stated  before.  I  believe  that  it  was  a  very 
serious  mistake  on  the  part  of  our  legislators  to  remove  the  limit  of 
.-.e  assets  and  o   caiMtalizaiion  of  corporations;  that  they  did  not 
u..y  c^^ns.uer  w'hat  they  were  doing.     I  believe  it  is  historically 
true  that  that  limit  -vas  removed  without  serious  consideration 
by  the  legislators  of  the  country  of  the  probable  elTect  of  their 
uction. 

Senator  \i;  wl.vnds.  Do  you  think  it  would  be  in  the  power  of  the 
Lnited  States  Government,  by  act  of  Congress,  to  limit  the  size 
ot  State  corporations  engaged  in  interstate  commerce  either  in 
point  of  size,  capitalization,  or  area  of  their  operations? 

Mr.  Brandkis.  I  do  not  suppose  it  would  be  constitutional  in 
one  sense  to  limit  their  size,  but  I  suppo.se  Congress  would  possess 
the  constitutional  power  to  confine  the  privilege  of  interstate  com- 
merce to  corporations  of  a  particular  character. 

Senator  Xi.wi.axds.  You  have  no  question  about  that  power^ 

Mr.  Brandeis.  I  should  think  not. 

Senator  Xkwlands.  It  would  be  -ecessary  to  fi.x  some  standard 
would  It  not?  ' 


584 


Industrial  Combinations  and  Trusts 


Mr.  Brandeis.  I  think  so;  yes,  sir. 

Senator  Xi.wlands.  Upon  which  or  by  which  the  administrative 
bureau  or  commission  charged  with  the  duty  could  determine 
whether  the  corj^oration  was  of  a  size  that  threatened  to  become 
a  monopoly  or  that  threatened,  as  you  say,  social  elBciency.  \ow, 
what  s;andard  would  you  fix;  how  would  you  phrase  it? 

Mr.  Brandkis.  I  do  not  think  that  I  am  able  at  this  time  to 
state  the  exact  provision  which  I  should  make.  I  feel  very  clear 
on  the  proposition,  but  I  do  not  feel  equally  clear  as  to  what  ma- 
chinery should  be  invoked  or  the  specific  provision  by  which  that 
proposition  could  be  enforced. 

Sc  lator  Nkwlands.  You  do  not  think  that  standard  should  be 
fi.xed  'n  dollars;  you  have  already  stated  that. 

Mr.  Brandeis.  I  am  very  clear  that  the  maximum  limit  could 
not  be  properly  fixed  in  dollars,  because  what  would  be  just  enough 
for  one  business  would  be  far  too  much  for  many  others. 


Senator  Xewlands.  And  yet,  if  you  were  establishing  to-d  y  a 
standard  to  which  corporations  hereafter  organized,  we  will  .^ay, 
for  the  i)urpose  of  engaging  i..  both  interstate  anri  Slate  commerce, 
should  conform,  you  would  not  permit  any  such  curporalion  to  con- 
trol 40  per  cent  of  the  business,  would  you? 

Mr.  Brandeis.  I  do  not  think  I  should.  I  mean  the  more  1  have 
thought  of  it  the  less  inclined  I  have  been  to  allow  that. 

Senator  Xewlands.  Would  you  be  willing  to  allow  one-tenth  in 
a  country  as  large  as  this? 

Mr.  Brandeis.  I  am  inclined  to  thinK  it  could  control  one-tenth 
with  perfect  safety. 

Senator  N'ewi.ands.   Vou  .vould  not  go  below  that? 

Mr.  Brandkis.  I  would  not  prohiliit  it,  and  I  should  be  per- 
fectly pri'pared  to  allow  any  ajipreciable  larger  percentage  to  be 
controlled  by  one  com.j/any. 

Senator  N'ewi.ands.  Vou  say  you  winild  i)e? 

Mr.  Brandeis.  I  would  be  prepared  to  allow  considerably  more 
than  one-tenth.  The  doubt  I  had  was  whether  40  was  not  too 
nuifh,  and  I  was  going  down  from  40. 

Senator  N'ewi.ands.  Now,  if  you  were  to  establish  such  a  stand- 
ard, would  you  apply  it  only  to  corporations  hereafter  organized  or 
endeavor  to  api)'y  it  to  corporations  already  organized? 

Mr.  Br.\.ndlis.  I  should,  in  the  first  place,  naturally  apply  it  to 


Methods  of  Dealing  with  thk  Trust  Prob 


LEM     58 5 


thos 


those  corporations  already  organized  which  had  been  organized 
in  •■luialion  of  the  Sherman  antitrust  law h         ^ 


killin"   .      ^';^'-^^'^^-  7°"   '•^^^"^•d   to  the  unfair  methods  of 
kilhng  competition    and  you  gave  a  statement  of  a  number  ui 
things  which  shou.d  be  forbidden.     How  would  you  make  th.;se 
unair  methods  impossible?     Would  you  punish  (he  corporation 
or  the  individual,  or  the  otBcials?  pv^iauon, 

Mr  Brani)i;i.s.  I  should  punish  both;  I  mean  I  think  the  law 
as  y.  stands,  giving  an  opportunity  of  tine  and  giving  an  opportunitv 
of  iniprovement.  is  proper;  but  I  should  give-wh;U  I  hould  expect 
would  be  even  more  elTective  as  a  deterrent-the  rights  to  the 
Hijured  individual  to  enforce  through  the  Government  action  in 
a  practically  automatic  way,  his  claim  for  treble  damages,  as  set 
forth  in  the  La  Tol  ette  bill.  That  would  prove  a  very  serious 
burden  upon  law-violating  corporations. 

Senat.jr  .\i:v.i.,vNDs.  You  spoke  of  community  of  interests  being 
a  factor  in  the  prevention  of  competition.  Take  the  shoe  factories 
in  New  England.    There  are  a  number  of  them,  I  presume,  are  there 

Mr.  Brandkis.  Y'es,  sir. 

Senator  Xewlands.  A  very  large  number? 

Mr.  Brandf.is.  In  Massachusetts  there  are  over  400 

Senator  .\..;xyi,ANi,s.  Would  it  be  practicable  there,  do  you  think 
o  prevent  individuals  from  owning  stock  in  half  a  dozen  shoj 
lactones,  or  otherwise? 

Mr.  Brandkis.  I  think  it  would  be  perfectly  practicable  i 
think  as  a  matter  of  f.ct  it  is  verv  uncommon  to-day 

Senator  \i.WLA.ms._  Do  you  .say  it  is  very  uncommon? 

Mr.  Brandkis.  It  is  very  uncommon  to-dav.  I  think  in  the 
shoe  industry  F  mean  in  the  mere  manufacture,  say,  of  shots- 
l!u;re  is  at  pre-,.„t  the  mo  -  perfe.  t  inMance  of  competition  a"nd 
evidences  o|  il,..  v...ue  of  competition  probably  of  any  industry  in 
liie  country.  ■'  -' 

SenatorNEVaANDS.  Do  v.ni  mean  to  say  that  a  person  seeking 
mvcMments  in  the  stock  of  a  shoe  factory  would  always  confine 
hi>  invest  me  ,t  to  any  particular  factor)-? 

Mr.  IjKANDEis.  I  do  not  mean  to  say  thry  would  always  do  so- 
hut  I  should  feel  perfectly  sure  that  there  was  no  appredable 
number  of  i,er,sons  who  inve.st  in  more  than  one  company  except 


586 


INUI-STKIAL    COMBINAIIONS    AND    TRUSTS 


in  .hose  instance,  which  T  h;,.^'". '",«;--'-;::  KtX" 

manufacturers  m  the  Ln  ltd  states  or  u  ^^^^  ^^.^^^^ 

last  census.  The  lar-.:est  shoe  "^'^"f  .^/^^"  .^'^^^^^iness.  You  have 
dees  only  a  very  lar«e  percentage  -^  ^h^  ^^'^'^^^'j;  ^.^,,,,  dan.er 
,  situation  ^-^^^^^:^^^i::.n.,.UUon  But  when 
at  tne  present  time  ot  tni  suppr  ^^^^00  case,  where  you  are 

v.m  arc  dealinR.  fur  »"^^^\"^^\\^  ;,^,^'  u^^^^^^^^^^^  con  rol  of  the  busi- 
•tryin«  to  break  up  a  -""l''^^.^  '  ^^'^ha  is  a^v  fur  three  or  four 
ness  has  Rone  mto  such  fcNs  ^;^'^^;„^^^^^;\'     ether  and  control  an 

LX.h»  y-u  i;avon;':.;°.rx.;/c,.„,n.„„  .«....„  is 

absolutely  destructive  of  compelitiun. 

•  •  *  * 

:;;;:„^r,:sr^i:s'L,n:;:i2t^ii  :^  away  s,e  h.... 

or  diminish  it?  ,    ,  r,,vi(lid  the  law  etViciently 

•^i::;S;;^ir!^i;rs:;;^^^  la^^actry .  th^  .an. ..... 

do  you  believe  that  if  there  was  no  .  hanR.  ■""\\  ;';\.  ,i,  ,,,„,,a  be 
were  allowe.l  to  ,o  on  as  they  i^^^^)^^'  ^t^'  /do  vou  believe 
the  survival  of  the  '"\><1^'--  i;^^,^,"^^^^^^^^^ 

it  would  be  the  absorption  of  the  '>  '^^"';,     >    ";,,^,  ,  ,3, "^he  absorp- 
Mr.  Branovis.  In  many  instances  I  th,  k  >«  "'^'  '„f 

tion  of  the  bu.iness  by  huge  ^^'^'^''^^^^'Zi^-U,.  been 
endurance  of  competitors  becomes  ^^ha-Ud    anc^  a   ^^^  ^^^^ 
entirely  overcome  m  a  great  many  cases,  lor 
machinery  case.  - -,   ,.,,,  ,i„  pot  believe 

, ..  Small  ••  probably  intended -Ed. 


Methods  of  Dealing  with   nii;    rKisr  PkonLEv     5S7 

Mr.  I5k.\ni)f.is.  X       ^vithout  ron^rcsMoiiiil  aid,  because  I  think 
yuu  need  noi  only  the  law  hut  i nforcement  of  the  law. 


Senator  Gore.  I  understood  vou  to  sav  the  ot^  r  day  that  you 
op[)osed  any  method  of  licensinj.'? 

Mr.  B-^VNDEis.  Yes,  sir. 

Senator  Cork.  Any  method  of  licensing  corporations  engaged  in 
interstate  commerce? 

Mr.  I}r.\.\deis.  Yes,  .sir. 

.Senator  Gore.  By  that  do  you  mean  a  hVensc  that  would  consti- 
tute a  sort  of  passport  or  e.xamination  (;f  health  and  one  that  would 
<  \tend  mimunity  from  prosecution? 

Mr.  Hr.xnueis.  Precisely:  or  which  might  i)c  so  construed  hy  the 
community,  although  it  did  not  actually  do  so. 

Senator  Gore.  I  want  to  ask  you  this:  Merely  a  requirement  that 
!iy  company  engaged  in  interstate  commerce,  without  reference  to 
method  or  manner  of  organization  or  object,  could  make  application 
to  some  constituted  auth-rity  fcr  a  license  to  engage  in  commerce, 
say  for  a  nominal  fee  of  a  u  illar.  ind  allowed  to  have  no  other  certifi- 
cate than  ii.^rely  registration— that  so  far  would  not  be  objection- 
able? 

Mr.  Br.\ndeis.  It  would  only  be  objectionable  in  th.it  it  pn.hably 

would  be  put  to  an  illegitimate  use.    That  is,  it  would  be  used  as 

rq)resentmg  practically  that  ih.'  ''rovernmcnt  is  ratifying  or  indorsing 

the  propriety  of  its  acts,  just  as  mese  certificates  are'f.)and  now  upon 

.in>  registered  under  the  pure  food  act,  etc. 

Senator  Gore.  What  I  have  in  mind  is  merely  a  license,  like  a 
saloon  man  gets  to  -dl  liquor— that  it  is  purely  formal  and  perfunc- 
tory to  that  extent. 

Mr.  Krandeis.  I  see  no  occasion  or  no  advanl.ige  in  having  a 
license.  We  ha\e  the  situation  now,  that  every  coriwrafion  must 
make  a  return  for  the  purj)ose  of  taxation. 

Senator  Gore.  I  was  coming  to  that.  In  ( ase  we  require  a  license, 
then  m;ikf  it  a  part  of  any  judgment  against  the  concern,  and  let  the 
revocation  of  this  licen-e  deny  the  right  to  engage  in  interstate  com- 
merce. 

Mr.  Br.wdeis.  I  do  not  believe  that  that  provision,  if  it  should  l>e 
made,  is  one  of  great  imictica!  v;i!ue  or  importance. 

Senator  (ioRE.  I  do  not  think  it  would  constitute  a  stroiitr  <ie- 
terrcnt.  ^ 


588 


InDUSI  .    COMBINATIOXS    AND   TRUSTS 


Mr.  Brandkis.  I  do  not  think  it  would  constitute  any  strong;  dc- 
terre-it.  Among  other  reasons  for  this:  It  is  a  matter  of  the  gnattst 
Mmplicitv  and  of  negligible  cost  to  dissolve  a  corporation  and  rein- 
corporate another.  The  question  In  What  is  going  to  be  done  with 
this  property?  and  not  the  question  as  to  whether  or  not  an  individual 
conH)ration'has  a  license  or  is  denied  a  license.  Are  we  going  to  lake 
an  appreciable  part  of  that  property  as  compensation  for  a  wrong 
that  has  been  done  individuals:'  That  is  an  imi)ortant  question. 
Are  we  going  to  have  that  pn.perty  distributed  under  condition- 
which  prevent  its  being  used  to  destroy  competition  or  restrain  com- 
petition seriously?  That  is  an  important  cjuestion.  But  the  (jues- 
tion  whether  an  individual  corporation  can  continue  to  do  business 
as  the  '-A"  com|)anv  of  one  State,  when  it  will  become  t'le  next  day 
th"  "A"  company  of  Massachusetts  or  Rhode  Island,  is  absolutely 
of  no  practical  -mportance.  ■    ,      ,n        j 

Senator  ('.OKI.  That  raises  this  questK^i  in  my  mind:  >Miat  do 
you  think  about  the  criminal  prosecution  and  punishment  fur  direc- 
tors and  those  who  engaged  in  these  practices? 

Mr.  Hr ANOi  IS.  I  think  the  criminal  law  is  an  extremely  important 
adjunct,  if  il  is  enforced.  It  has  certainly  had  a  stimulating  eflect 
in  connection  with  violations  of  the  interstate  commirce  act  of  a 
ver>-  extraordinarv  character  .Ur«  were  ready  to  do  almost  any- 
thing that  thev  hinv  to  be  ivron^  until  the  vision  of  a  jail  ose  up  be- 
fore them.^  And  it  is  an  extraordinary  thing.  I  think  it  is  perhaps 
a  •special  testimonv  to  the  love  of  liberty  on  the  part  of  an  .American 
Ihat  the  rial  thoi'mht  of  going  to  jail  is  almost  paralyzing  to-day; 
and  men  who  violated  the  interstate  commerce  law  daily  and  with- 
out any  coniiHUHtion,  wh;n  it  really  came  before  them— the  idea 
that  the  criminal  proceedings  were  going  to  be  resorted  to— suddenly 
became  ol)edient,  law-abiding  American  citizens. 


Senator  (Tmmins.  Mr.  Brandeis,  I  want  to  take  up  for  a  little 
while  the  i)roposal  that  has  been  suggested  for  licensing  cori)ora- 
tions  engaged  in  commerce  among  the  States  and  with  foreign  na- 
tions. So  far  as  this  iiK^uiry  is  concirned.  I  assume  that  the  ideal 
condition  would  be  one  in  which  all  corporations  eng:iged  in  inter- 
state commerce  were  in  consonance,  so  far  as  organization  goes  and 
in  respect  to  tluir  practices  and  methods,  with  the  antitrust  law 
and  any  amendment  that  may  be  made  to  it.  That  is  the  condition 
'  Italits  in  this  paniKr.iph  arr  the  cJitor's. 


Methods  of  Dealing  -.vitii  the  Trust  Problem     5S9 

ZvZhV^f"-    T^'  ^"''7'f '  Commerce  Commission  stands 
vtrv  hi_^h  in  the  conluJence  of  the  people,  does  it  not? 
Mr.  liRANDEis.  To-day;  yes,  sir. 


Senator  Cummins.  And  m  the  same  way.  we  could  ae  Ttain 
uhethcr  a  corporation  organized  as  was  proposed,  by  reason  of  its 
power  or  extent  would  be  a  monopoly,  or  an  attempt  to  cr-^a  e  a 
monopoly,  under  the  second  section  of  the  antitruM  law,  couid  we 

Mr.  liR.\NULib.  That  would  be  possible. 

Senator  Cummins.  Now.  do  you  not  believe  that  a  commission 
properly  or^^m./ed  could  pa^s  on  questions  of  that  character  so 
that  the  people  of  the  country  would  be  better  protected  than  to 
await  the  linal  decision  of  the  court  after  years  of  litigati(,n-> 

-Mr.  lJR.\NDLis.  I  am  not  certain,  Senator  Cummins,  that  I  under- 
stand your  question.  But  1  assume  that  it  applies  or  would  ar.ply 
tn  practically  all  corporations  that  desire  for  the  future  to  enrLi 
in  interstate  commerce.  ^■^^k^- 

Senator  Cummins.  I  am  imagining  now  that  w.-  have  a  clean 
sheet,  and  are  simply  providing  against  the  tutur,..  I  uJH  come  to 
the  other  in  a  moment. 

Mr.  Brandeis.  I  .said  it  was  possible,  and  perhaps  I  might  state- 
showmg  you  more  clearly  what  I  have  in  mind -the  difriculties  of 
^uch  a  commission  We  are  to-day  especially  to  be  congratulate.l 
-n  the  chamcter  of  the  Interstate  Commerce  Commission  an.i  on 
their  accomph.^hments.  Of  course,  we  have  got  to  remember  that 
during  a  large  part  of  the  24  years  of  the  organization  of  the  com- 
mi^Mon  here  was,  for  one  reason  or  another,  not  that  .satisfaction, 
and  th.it  It  took  a  very  large  number  of  years  and  a  great  ckal  of 
addit.r.na.  i)erfecting  legislation  to  enable  the  commission  to  arrive 
at  the  point  where  they  could  and  di.l  sati--fy  the  public  needs. 
Now    he  grea  difficulty  whu  h  it  seems  to  me  to-day  the  commission 

Ml  I  labors  under  IS  the  multitude  of  questions  and  theonerous  char- 
acter of  the  duties  which  it  is  called  upon  to  perform.  Thev  hive 
t"  d.ui  with  2,,6,ooo  or  240,000  miles  of  railroad,  .md  the  (luestions 
whu  h  necessarily  arise  in  connection  with  them  are  numerous  We 
have  iu<l  the  situation  with  regard  to  .some  of  the  most  important 
cases,  for  instance,  like  the  Intermmmtain  case.    Now,  wholly  aside 

fro"i  the  recent  interferrn.e  with  its  action  bv  the  Commerce  Court 
wt  h.txe  there  had  a  controversy  in  which  the  endeavor  to  adjust! 


59° 


Industrial  (Vimiuxations  and  Trusts 


what  was  a  {)roper  rate  has  rxtcnded  over  a  large  part  of  a  genera- 
tion. 

We  have  had  all  these  difficulties,  although  the  Interstate  Com- 
merce Commission  deals  only  with  transportation,  and  railroad 
transportation  is  a  business  which  is  jmictically  uniform  in  its  prob- 
lems and  in  which  the  problems  are  largely  the  same  yesterday, 
to-day,  and  to-morrow.  Of  course,  circumstances  dilTer;  br*  after 
all,  the  pr  blems  of  railroad  rate-,  the  jiroblems  of  discrimination 
are  largely  the  same  prohleni-  thnni^hdut  the  country.  When  we 
are  dealing  with  rates,  one  of  the  comnione-t  methods  of  decision 
arri\ed  at  by  the  commission  is  l)y  comparison — a  com[)arison  of 
the  service  and  of  the  charges  for  a  similar  service  on  the  same  or  on 
another  railroad. 

When  vou  pass  from  the  realm  of  transportation  to  the  realm  of 
industry  "the  jirobleiiis,  instead  of  being  uniform,  are  widely  vary- 
ing, and  in>tead  of  being  practically  stable,  they  are  ever  changing. 
The  difficulty  that  I  see,  or  one  of  the  difficulties  which  I  see,  in 
appointing  at  "this  time  a  commission  with  the  power  of  granting 
or  denying  permission  to  engage  in  interstate  business  rests  in  the 
fact  that  the  commission  would  be  burdemd  with  the  decision  of 
fpiestions  so  numerous  that  not  only  (me  com.mission  but  many 
commissions  would  be  unable  to  compass  the  work. 

Take  the  work  of  the  Bureau  of  Corporatio  s  on  these  few  jirob- 
Icms— the  Beef,  Tobacco,  Steel,  and  Oil  I'rusts.  The  inquiry  neces- 
sary to  determine  facts  in  regard  to  the  existing  business  has  occu- 
pied six  or  se\en  years. 

Vou  projjose,  in  the  first  instance,  ;it  all  events,  to  deal  only 
with  the  future;  l)Ut  an  investigation — a  vcr>'  extensive  investigation 
— would  have  to  be  made  before  any  commission  could  justly  say 
that  a  license  should  be  granted  or  denied.  .\n  investigation  of  that 
kind  ought  to  Dermit  the  participation  of  tho^e  directly  int,'rested, 
either  on  behalf  of  the  community  or  competitors,  like  at  hearings  be- 
fore the  Interstate  Commerce  Commission.  That  would  tend  to 
safet  y ,  but  also  take  more  t  ime  of  the  commission.  We  sht  luld  go  ex- 
ceedingly slow  in  thedeveli)])nu'nt  of  any  plan  of  control  by  commis- 
sion. The  first  step  ought  to  be  investigation  only,  to  enlarge  very 
much  the  realm  and  the  scope  of  the  j)owers  of  investigation. 

.\t  i>resent  I  -hould  feel  th.it  ,i  decision,  even  though  a  tentative 
decision  by  such  a  commission,  roulting  in  the  granting  or  denial  of 
a  license  might  lead  us  into  many  erroneous  paths. 


Mi;n{()D.s  OF  Dealing  with  the  Trust  Problem    591 

Senator  Cummins.  V(,u  have-  advocated  here  thi  pa>>a"e  of  a 
law  which  makes  40  per  cent  of  the  business,  I  think,  prima  facie 
evidence  of  a  violation  of  the  antitrust  statute? 

Mr.  Braxokis.  Presumptive;  yes;  in  case  of  a  combination. 
Senator  Cummins.  Now,  if  we  can  arri-e.  with  the  information 
we  have  now,  peneraliy  speal.ing,  at  the  conclusion  that  any  consoli- 
dation or  combination  that  proposes  to  take  in  40  per  cent  of  the 
business  is  ai,'ain>t  public  policy  or  against  the  statute,  there  cer- 
tainlv  would  not  be  very  much  ditTicultv  in  the  commission  arriving 
at  a  Mmilar  conclusion,  either  increasing  that  percentage  or  dimin- 
ishing It,  as  the  case  may  be.  We  have  en.-ugh  general  i.iformation 
to  carry  us  to  some  conclusions  upon  this  subject  of  indu-trv 

.^Ir.  Branouis.  Well,  I  think  the  volume  of  the  accessible' inlor- 
malion  is  extremely  small.  For  instance,  in  connection  with  the 
investigation  which  1  was  obliged  to  make  in  the  TobKicco  Trust 
case,  I  endeavored  to  ascertain  with  some  exactitude  the  status  ,,| 
the  independents.  I  had  the  assistance  of  some  of  the  airiest  and 
best  versed  ol  all  of  the  independents  who  had  given  some  thought 
not  only  to  their  own  business  but  the  busine.'-s  of  others. 

Vet  there  was  an  extraordinary  lack  of  knowledge  on  their  [.art 
None  of  those  men  were  able  to  give  fully  the  kind  <.f  information 
m  respect  to  their  competition— t.ther  than  the  trust— which  you 
and  I  would  wish  to  act  upon  in  any  important  alTair  of  life.  I 
dare  say  if  1  had  had  open  for  me  the  avenues  of  the  Bureau  of 
Corporations— w  Inch  must  have  investigated  to  a  certain  extent 
also  the  independents  as  well  as  the  trusts  -I  could  have  gotten 
more  inlormation.  Hut  whatever  information  the  bu-eau  had 
was  the  result  of  a  \cry  wide  incjuiry,  and  I  think  if  to-day  vou 
would  undertake  in  any  branch  of  indu.-try  to  ascertain  accun-tely 
the  i.ade  facts  you  would  !ind  that  the  inquiry  would  involve  a 
considerable  investigation  the  moment  you  reached  what  was 
termed  the  other  day  the  "twilight  Z(  ne." 

Mr.  Bran-di-,is.  I  am  convinced  that  there  i>  much  reason  in  the 
position  which  y<.u  take,  and  T  heartily  svmpathize  with  the  pur- 
pose of  it.  The  doubt  I  have  is  as  to  our'ability  to  develop  >afely 
at  once  the  machinery  to  which  can  be  conlided'  the  serious  power 
ot  licensing  the  corporations,  because  the  elT.  J  of  such  licensing 
v%-itl  he  a  certificate  of  good  character  as  '  would  be  an  extremely 
p<itent  force. 

'  i"hua  in  originaL — Ed. 


59^ 


Industrial  Combinations  and  Trusts 


My  doubt  goes  rather  as  to  what  can  be  done  at  the  present  time 
than'as  to  what  we  may  look  forward  to  a  little  later.  My  thought 
is— as  1  undertook  to  express  it  n  response  to  Senator  Newland's 
questions  -that  the  tirst  step  in  the  organization  of  such  a  commis- 
sion would  be  to  gi\e  it  large  and  much  broadened  power  of  investi- 
gation over  any  which  now  exist.  Gi\e  it  full  rii,'hts  to  hear  com- 
plaints of  those  who  believe  themselves  to  be  wronged.  Throw  open 
the  results  of  its  intiuiries  to  those  who  arc  directly  interested  in- 
stead of  making  the  great  mass  of  information  which  is  obtained 
subject  only  to  disclosure  at  the  will  and  discretion  of  the  President. 
All  this  information,  like  a  great  mass  of  information  obtained  by 
the  Interstate  Commerce  Commission  and  by  other  bodies,  should 
be  public  information  to  be  acted  upon  by  the  i)ublic.  Gradually 
as  the  machinery  of  the  commission  is  perfected,  and  particularly 
as  the  volume  of  available  knowledge  in  regard  to  American  busi- 
ness accumulates,  we  might  more  safely  take  the  next  step  of  giving 
the  commission  important  powers  of  decision.  It  is  only  a  question 
of  the  time  when  such  powers  should  be  granted. 


Senator  Cummins.  You  have  spoken  of  some  of  the  disadvantages 
which  might  ensue  if  a  license — or  1  would  hardly  call  it  a  licensc--- 
but  if  the  privilege  were  extended  to  a  given  coq^oration  to  do  busi- 
ness among  the  States,  it  occurs  to  me  there  arc  some  advantages. 
The  corporation,  in  the  tirst  place,  should  be  honestly  capitalized 
before  it  was  given  this  privilege.  That  is  one  advantage,  no  matter 
whether  it  was  organized  under  the  laws  of  a  city  or  the  laws  of  the 
Nation.  The  second  advantage,  as  it  seems  to  me,  would  be  that  if 
it  came  to  the  knowledge  of  the  commission  -and  it  would  ha  ip- 
portunilies  for  securing  knowledge  that  could  not  possibly  be  had  by 
the  Attorney  General  or  by  the  court,  for  the  courts  must  get  their 
knowledge  in  a  specified  way— that  the  corporation  was  engaging  in 
practices  that  were  in  violation  of  the  law,  or  which  the  commission 
believed  to  be  in  violation  of  the  law,  the  commission  would  sa>  to 
the  coryioration,  "Quit,  or  your  license  or  permission  is  revoked." 
Now,  if  the  permission  to  do  interstate  business  should  be  revoked, 
even  though  the  conx)ration  might  go  on  subject  to  the  power  of  the 
court,  yet  the  mere  fact  of  revi;cation,  it  seems  to  me,  would  counter- 
balance all  the  disadvantages  of  holding  the  iHTmis.sion ;  and  still  fur- 
ther, the  fact  that  the  permission  might  be  riv<iked,  and  thereby  the 
corporation  prima  facie  adjudged  to  be  engaged  i     unlawful  prac- 


Methods  of  Dealing  v.ith  the  Trust  Problem    593 

tices,  would  secure  far  better  obser\'ance  of  the  law  than  we  now 
have. 

Mr.  Bra.vdf.is.  This  difficulty  exists,  does  it  not,  Senator?  Take 
this  very  position  which  you  have  sugj^ested,  of  having  that  commis- 
sion pass  upon  he  question  of  the  revocation  of  a  license.  Now, 
that  IS  a  question  most  serious  in  its  character— an  inquiry-  which' 
in  the  case  of  almost  any  corj)oration,  but  particularly  of  a  large 
corporation,  would  involve  an  investigation  in  which,  of  course,  the 
corporation  must  have  the  ami)lcst  opportunity  to  participate,  and 
an  issue  such  as  is  tried  out  in  the  courts— I  mean  of  the  same  char- 
acter that  is  tried  out  in  the  courts,  invohing  a  verv  long  period  of 
time.  The  revocation  of  that  license  may  practic-iflv  amount  to  a 
taking  away  of  half,  or  a  greater  part,  of  the  value  of  all  the  prop- 
erty of  that  coqioration. 

Now,  surh  a  power  would  have  to  be  e.xercised  most  carefully  and 
most  considerately,  and  surrounded  really  bv  all  protection,  to  in- 
sure a  correct  and  just  decision  that  we  now  have  in  the  courts. 
Consequently,  the  investigation  would  be  a  matter  of  a  long  time. 
The  decision  of  them  might  necessarily  be  postponed  a  long  time, 
so  that  they  would  not  really  have  spcedv  redress,  or  a  hasty  de- 
cision would  be  made  which  all  would  have' occasion  to  regret. 


^  I  * H E    tollowing   pages    contain    advertisements 
of  books  on   kindred  subjects 


ConcciU.ation    and    Control      a  Solution  of  the  Trust  ProLlcn. 

in  the  United  State, 

Hy  C.  k.  VAN  HISK. 
A  K     I       u-  1  ^'"'^^  ^^"'"y  ^'•0'^  "C',  postpaid  ?J  ij 

mattianYom 'th^'"''"'  ""^'^'  ''^'^^'''^^■"^  ^'^^  "'-'  h-  d-wn  for  his 
Tffl.     7u  'f^''"^'  ''■•''"'^^  °"  manufactures  made  by  the  cen^us 

fir.t  to  put  before  the  reader  that^^StlcTt^^h  i  'etn^^;';.:;"; 
a  sound  conclusion  regarding  the  handling  of  the  great  prob  er^  of     .,  '  ' 

L  thLfrnauers  ^'^"'"^  '^^  ^"^^'  ^'^^  ^"^^«^  ^'^'^^'^"'^  ^'^  "^  ™-'-i°ns 
The  book  is  divided  into  t^ve  main  chapters:  The  (Jeneral  Fa.ts  K-L'ardin-. 
Re.":r,!i"'r"'  ^""^^•.  ^-"-^-^  Illustrations  of  Concent     t,      Tht  L     ' 

t  ndt  hesc  a;e';X':"'  ^^\^""^^'-  '"  "^^er  Countries  and  Remc^d  " 
Ln.kr  these  are  taken  up  such  questions  as  Kconomic  Advantages  of  Con 
mentation    Its  Causes,   Its  Purposes;  The   Kinds  of  Competit  on     H^: 

S.r  orati.n'T'v'""'-''''^^''^"'^"^  '^''  ^"«-f^->-'  ^'nitcd  S  Ue!^' sfed 
Corporation,  The  American  Sugar  Refining  Companv,  The  Laws  Reu-ard 
ng  Co-operation  in  England,  Germany,  Austria    Irance    I^  re  Food  ami 
Drug  Laws,     atent  Monopoly.    The  Creation  of  Trade  Commilions  aud 
Commission  Control  of  Public  Utilities.  «-ommi.sionb  dud 

"Dr.  Van  Hise  has  written  an  interesting  book."— AV^.  York  Sun. 

"Tne  book  deserves  a  careful  reading. "-fioiton  Herald. 

"A  book  students  of  the  trust  problem  ,annot  afford  to  overlook." 

—Boston  Advertiser. 


PUBLISHKD  B\- 

THE    MAC>ni  i   \\   COMPANY 

PubUshers         6  Avenue         New  York 


The  Cuntrtil  ot  TrLihts 

I  New   I-".  I'.tion) 

liy  JdHN  HAIKS  (  l.AKK  aid  jDllN  MAlRlCi:  CLARK. 

Llotii.  i^mo,  ii.oo  net,  post  paid  $i.io 

■•The  IVoplr  anil  the  PMlikm,  "  ■'(.'ombinalinn  \\t~us  Mnnopulx-."  "How 
ii'it  to  llial  W  itli  1  tU!-t>."  •■  Muniipolio  anil  llu  l.aw,"  "  1  icMnu  live  (.'nnj- 
pclilion."  ■•('(instru(li\c  Cumpttition,"  arc-  tin  K'adini;  (liaplurs  o!  this 
vohimL,  \>-hi(h  i-  wrilli'n  in  a  manner  fair  and  tliorough  a^  well  as  com  i-c-.' 

— Chicago  Intir-OciuH. 

■■ll  .ilTcr-  an  eiundnr.e  jusis  (or  a  di-tineti(-n  lietween  reaMiiiable  and 
unriasonahlf  ri-trainl  of  trade." — liufalo  Express. 

"A  larefully  thoU).'ht  out  tn-ati'-e  on  an  important  siihjcet." 

—  I'kihuldphia  Inquiri-r. 

"The  work  presents  an  i)Ulkx>k  ftir  the  future  of  industry,  under  a  policy 
that  i.  liearly  in  .si^hl.  wliiili  aiipear-  more  cncouratiins  than  any  whiih 
l,a~  been  recently  ulTorded  ljy  the  aitual  stale  of  the  business  world   ' 

—San  Fran'  isio  (  ail. 


ITKl.I^lll  P   \'-\ 

rill    M.AtMll  1  .\N  coMrwv 

Publishers         64-bti  Fifih  Avenue         New    York 


Elementary   IVinciples  of  Kconomics 


Hy   IKXINC    i-IsHKK.   Proir-.-or  of   Poliiical   Kconomy.   Vale  Uni- 
^''■''■-''>'-  Cloth,  lamo.  _,-j;  'pp.,  f::.oo  net 

(Extracts  from  the  Preface) 

Of  the  many  pos>ihlc  mcili.Kls  ,,i  vwiiing  cionomi(  tcxJidoks,  there  are 
three  which  follow  woll-dct'ined,  thouph  widely  different,  orders  of  topics. 
These  are  the  "historical,"  the  •'logical,"  rnd  the  "[)cdagogical." 

The  peda^•ogieal  begins  with  the  student's  existing  experience,  theories, 
and  prejudices  as  to  economic  topics,  and  pnxeeiN  to  mold  them  into  a 
correct  ;md  self-consistent  whole.  The  order  of  ihe  first  method,  there- 
fore, is /row  oiidail  to  modern;  that  of  the  second, //•,)»;  iimpi,  to  complix; 
and  that  of  the  third,  from  famiUar  to  unfaniUhir.  The  third  order  is  the 
one  here  udopted.  Th.il  the  pro[)er  nielhod  ol  ,tud.\ing  ^'eogtaphy  is  to 
begin  with  the  locality  where  the  jiupil  lives  is  now  well  recognized.  With- 
out such  a  begmning  the  efTect  on  the  student's  mind  may  be  like  that  be- 
trayed by  the  schoolgirl,  who,  after  a  year's  study  in  geography,  was  sur- 
prised to  learn  that  her  own  playground  was  a  part  of  the  .surface  rf  the 
earth.  .  .  . 

This  book,  chcrrforc,  aim':  to  take  due  account  of  thisc  ideas  with  which 
the  .-tudeni's  mind  is  already  furnished,  and  to  build  on  and  transform 
these  ideas  in  a  manner  adapted  to  the  mind  containing  them.  This  is 
especially  needful  where  the  ideas  arc  apt  to  be  fallacious,  -^he  economic 
ideas  most  familiar  to  those  t^rst  approaching  the  study  of  economics  con- 
cern money.— personal  pocket  money  ael  hank  accounf^.  household  ex- 
pense-,  and  inn.mr,  ,lu-  fortune-  of  the  ri.h.  Moreover,  these  ideas  are 
largel\-  fallacious.  Therefore,  the  subject  of  money  is  introduced  early  in 
the  bo<,k  and  recurred  to  continually  ,is  ta.  h  new  branch  of  the  study  is 
unfolded  For  the  same  reason  ciiMuerable  attention  is  given  to  cash 
aci  ouutiiig.  and  to  those  fundamental,  but  neglcc  t.'d  princii)les  of  economics 
which  underlie  accounting  in  general.  I-'.very  student  at  t'lr-t  in  a  natural 
mercantilist,"  and  ev,  rv  teacher  has  to  cojk-  eventually  with  the  prcju- 
dl(  e-  and  misconceptions  which  result  from  this  fact.  Vet  no  texil)ook  nas 
app.i:.  nil\  .ittempted  to  meet  these  difikulties  at  the  point  where  they  arc 
first  encoiinlered,  which  i-  .ii  the  beginning 


ITHI  i-lll  I)    \\\ 

Till     MACMIl  l..\\    C(/\II».\\V 

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Principles  of  Economics 


By  ¥.  W.  TAUSSIG,  Henry  Lrr  Professor  of  Economics  in  Harvard 
University. 

Cloth,  Svo,  2  volumes,  $4.00  net  pet    , 

This  book,  wliirh  is  adciressed  neither  to  specialists  nor  to  ch'dren,  but 
to  stu(lcnt3  and  the  educated  public,  states  simply  but  fully  the  main 
principles  of  economics  and  their  application.  It  does  not  avoid  difficult 
or  severe  reasoning,  but  centers  attention  on  the  larger  problems  and  the 
important  trains  of  r'-asoning  and  treats  these  liberally  and  fully.  The 
bcx)k  deals  with  the  present  day;  there  is  very  little  of  economic  history, 
very  little  about  the  phenomena  of  scmi-(  ivilization  or  barbarian  society. 
The  cxp''  'enics  and  problems  of  countries  of  advanced  civilization  are 
primarily  kept  ir  \ie\v.  American  problems  naturally  receive  considerable 
attention,  but  the  author  i.~  chiefly  lonterned  with  those  principles  which 
arc  of  general  application  in  all  of  the  leading  countries  (jf  modern  times 

"The  book  is  a  notable  addition  to  tlie  literature  of  political  economy. 
The  ease  born  of  thorough  familiarity  with  every  {)art  of  the  subject,  and 
of  long  practice  in  successful  teaching  of  mature  students,  is  apparent  in 
style  throughout." — A'«i'  York  Evening  Post. 


Monopolies  and  Trusts 


By  RICHARD  T    !■,I.^ 


Cloth.  i2mo.  $!.:    net.  postpaid $1.^7 


1"  this  work  the  man  uho  uants  •  '  kno-tf  ma>'  tind  i  condensed  form,  the 
causes  c)f  trusts,  the  laws  establishing  their  prices,  their  limits,  and  their 
eflorts  to  control  prcxluction  The  evil-  of  monopoly  are  plainly  stated 
and  remedies  are  proposed.  This  fxwk  should  be  a  help  to  every  man  in 
ac  live  business  life. 


rUHLISHKI)    HV 

THK    MACMIl.l.W   COMPANY 

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